Dedollarization is not a shift—it is a threshold

Dedollarization is one of the most poorly handled concepts in contemporary economic debate. With every transaction made in yuan, some announce the imminent end of the dollar. Conversely, others reduce it to a geopolitical pipe dream. Both interpretations fail for the same reason: they confuse the existence of a mechanism with the activation of a regime.

The reality is more demanding. Dedollarization is neither a myth nor an event. It is a conditional process, the dynamics of which depend on a parameter rarely stated clearly: the threshold at which marginal accumulation becomes a systemic phenomenon.

A real mechanism—but not self-executing

The “inverse liquidity pump” describes a simple mechanic. If a growing share of oil flows is denominated outside the dollar, the corresponding surpluses cease to be recycled into American assets, particularly Treasuries. Structural demand for U.S. debt is thereby weakened, exerting upward pressure on its financing costs.

The logic is sound. But it is static.

An accounting mechanism is not a macro-financial trajectory. Between the two lie elasticities, substitutions, and, above all, orders of magnitude. On the scale of a U.S. bond market exceeding $25 trillion, a marginal shift in global oil flows—even by several percentage points—is absorbable without visible effect. On the other hand, a sustained reallocation in the range of 10% to 20% would begin to alter the buyer structure and could result in a perceptible rise in the term premium, especially in a context of high deficits and a reduced presence of official buyers.

In other words: the mechanism exists, but it is not self-executing. It is contingent upon a threshold.

Visible signals—but still sub-critical

Recent developments are real. Energy transactions in yuan are multiplying at the margins. Experiments with alternative settlements are emerging, including in strategic zones like the Strait of Hormuz. The yuan’s share in certain energy trade flows has progressed faster than expected.

But scale remains decisive. A few transactions out of tens of thousands of annual flows constitute a signal, not a shift. To confuse the two is to extrapolate a trend from noise.

The symmetrical error is to ignore them. Because these signals have a specific property: they are cumulative.

The true bottleneck: The destination of flows

The central question is not about the currency of transaction, but the reserve currency.

For flows to durably exit the dollar, they must find an alternative destination capable of absorbing massive volumes with comparable characteristics: depth, liquidity, legal certainty, and convertibility. This is the function currently served by U.S. markets—one that alternatives still struggle to offer.

The renminbi is advancing as a medium of exchange. It remains marginal as a reserve currency. This gap is not anecdotal: it constitutes the structural constraint of the process. Substituting an invoicing currency is relatively simple. Substituting a global reserve asset is not.

As long as this asymmetry persists, a significant portion of international flows—even those initiated outside the dollar—continues, by necessity, to be recycled back into U.S. markets.

A coherent Chinese strategy—but constrained

China is explicitly pursuing the internationalization of the renminbi. The logic is strategic: reduce dependence on the dollar, increase financial autonomy, and structure monetary spheres of influence.

However, this ambition hits an internal contradiction. An international currency requires financial openness—capital account convertibility and the free movement of capital—which is difficult to reconcile with a model based on flow control.

This tension does not make the trajectory impossible. It makes it gradual.

A slow dynamic—but irreversible

Where dedollarization becomes analytically interesting is not in the hypothesis of a sudden collapse, but in that of marginal accumulation.

Every sanction, every restriction on access to the dollar-based financial system, and every incentive to diversify payment channels produces a learning effect. Actors do not move away from the dollar out of ideological conviction, but through risk management. They build alternatives the way one takes out insurance: before they actually need it.

This dynamic is slow, but it possesses an essential characteristic: it is difficult to reverse. Once an alternative payment infrastructure is in place, it does not disappear.

The critical point, therefore, is not the appearance of non-dollar flows, but their accumulation until the moment they cease to be marginal and become macro-financially visible.

Conclusion

Dedollarization is not a narrative to be settled, but a variable to be measured.

The “inverse liquidity pump” describes a real possibility, the premises of which are observable, but whose activation depends on strict conditions: the volume of flows, market structure, and the absorption capacity of alternative assets.

The relevant debate is not about announcing the end of the dollar, but about tracking the indicators that would signal a regime change: the composition of Treasury buyers, the evolution of the term premium, the growth of alternative currency reserves, and the effective depth of non-U.S. markets.

It is a question of threshold, speed, and structure.

In other words: not a prophecy, but an open empirical problem.