New Indonesia–China payment system: Chinese on de-dollarization spree in Southeast Asia

China is steadily internationalizing the yuan, now launching a new cross-border QR payment system with Indonesia.  (That is the correct nomenclature – internationalizing and not reserve currency).

What’s the new payment system about?

♦️ Users can now use local mobile apps, like China’s Alipay and Indonesia’s QRIS, to scan QR codes and make retail payments in either country using their national currencies, the South China Morning Post reports

♦️ The payment system will reduce transaction costs and currency risks for Chinese and Indonesians

♦️ Besides expanding international use of the yuan, China is also strengthening economic integration with Indonesia—a country of 287 million people and a projected economic growth rate of 5%

♦️ Previously, in January 2025, Indonesia and China renewed their bilateral swap agreement, expanding the arrangement to 400 billion yuan ($59 billion) or 878 trillion Indonesian rupiah

♦️ The China–Indonesia Local Currency Settlement (LCS) mechanism was launched in 2021 and upgraded in 2025 to the Local Currency Transaction (LCT) framework, expanding local currency settlement from trade and investment to all balance-of-payments transactions, Xinhua reported

China is also pushing its alternative payment systems in other Southeast Asian nations (and in Africa as well where almost 200 banks are now integrated with a cross border settlement system which is for large transactions, and not only a retail system).

➡️ In Thailand, Chinese visitors have been able to use domestic digital wallets to pay local merchants in yuan since late October

➡️ In Vietnam, payments via UnionPay have been available since December, with the system expanded last month to include Alipay

➡️ Similar cross-border payment services are also operating in Malaysia and Singapore

Reducing dollar use in populous, dynamic, and rapidly developing Southeast Asia poses a real challenge to the US.

This is then why China can tell their ‘teapot’ refineries to simply ignore the new sanctions that the US placed on these transactions.  They do not touch the dollar system.   Although this posts deals with retail payments, the larger payments for goods and commodities work exactly the same way.  Balance of trade must be adjusted