De-dollarisation will lower costs for Malaysian manufacturers and SMEs but the US, with its significant leverage in the global financial system, can exert pressure on economies that make the change.
For a start, costs will come down in the form of lower fees and the level of exposure to foreign currency volatility will be reduced, manufacturers and small and medium-size businesses (SMEs) told FMT.
On the other hand, a push for a quick exit from the greenback to the RMB will invite external pressure given the greenback’s dominance in the global financial system, an analyst said.
Good move but total switch not possible
Federation of Malaysian Manufacturers (FMM) president Jacob Lee said switching from dollar-based settlement to RMB can deliver tangible savings in transaction fees and foreign-exchange hedging costs for firms with China-linked supply chains.
“It is especially beneficial for large-volume exporters such as electronics since RMB settlement in transactions with China reduces the need to convert through an intermediate currency, reducing transaction costs and stabilising long supply chain costs,” he said.
Manufactured goods, especially electronics, accounted for more than 80% of Malaysia’s exports in 2024 and the first quarter of 2025, making the manufacturing sector key in any decision to switch.
Lee said that RMB settlement helps to stabilise costs by reducing exposure to third-currency volatility, but he cautioned that limited RMB convertibility and the dollar’s entrenched role in global trade remain key constraints.
“Manufacturers are aware that US dollar dominance (82%) of international trade does not mean that there can be a full switch to RMB. In fact, although de-dollarisation is much talked about, we are a long way from a switch to RMB, should it happen at all,” he added.
Nonetheless, the push to reduce reliance on the US dollar in international trade is already gaining momentum across Asia, riding on the wave of deepening geopolitical tensions and global financial uncertainty.
Asean countries have stepped up efforts to promote local-currency settlement in regional trade, a shift reflected in the Asean Economic Community Strategic Plan 2026-2030, which prioritises regional payment systems over the greenback.
Outside of Asean, Malaysia and India have agreed to promote the use of the ringgit and rupee in bilateral trade and investment, a deal struck between Prime Minister Anwar Ibrahim and his Indian counterpart Narendra Modi during the latter’s visit to Kuala Lumpur on Feb 8.
Business interests hold sway
For both manufacturers and small and medium-size enterprises, it is commercial considerations rather than geopolitics that is driving the move towards RMB settlement.
For instance, Lee said, manufacturers are balancing Chinese buyers’ preference for the yuan against the benefits of a strengthening ringgit.
He pointed out that attention has increasingly turned to the use of the RMB, particularly in economies with deep trade links to China.
In Malaysia-China trade, cross-border RMB transactions surged 27% in the first quarter of 2025 to 102 billion yuan (RM59 billion), a record high for bilateral local-currency settlement.
Even so, the RMB is still some distance from becoming the dominant settlement currency.
SMEs take a pragmatic view
SME Association of Malaysia president Chin Chee Seong said there was a “clear and pragmatic shift” in how SMEs view the use of the RMB in trade with China, driven less by ideology and more by cost and operational realities.
“While the US dollar remains the default currency for many businesses due to long-established systems and familiarity, the move towards the RMB is no longer a fringe discussion. It is increasingly driven by commercial and operational considerations,” he said.
With China having been Malaysia’s largest trading partner for the past 16 years, Chin said, efficiency and cost optimisation are shaping settlement choices, prompting SMEs with frequent China trade flows to reassess whether dollar-based settlement still makes commercial sense.
Direct ringgit-renminbi settlement enables firms to bypass the ringgit-US dollar-RMB route, cutting transaction costs and reducing exposure to third-currency volatility. SMEs account for about 20% of trade between Malaysia and China.
“For SMEs, this can translate into savings of up to 2% in transaction fees, while also improving margin stability,” Chin said, adding that improved RMB liquidity and banking support in Malaysia have made such arrangements increasingly viable.
US pushback?
Foreign policy analyst Phar Kim Beng of the International Islamic University Malaysia said the RMB is gaining traction as China’s trade surplus and cost-competitive exports make it easier for trading partners to accept settlement in the Chinese currency.
However, he warned that the shift is not without risks, cautioning that countries which move too quickly or aggressively away from the US dollar could face external pressure.
Phar said the dollar’s dominance is anchored in its central role in global oil and gas trade, which remains overwhelmingly priced and settled in US currency. He also said that as long as this structure holds, the US retains significant leverage in the global financial system.
From an SME perspective, Chin said de-dollarisation is not about abandoning the US dollar but reducing over-dependence on a single currency.
“The future is therefore not about choosing one currency over another, but about using the right currency for the right trade flow.
“By aligning settlement currency with actual trade flows, Malaysian SMEs can reduce costs, manage foreign-exchange risk more effectively, and position themselves to compete confidently in an increasingly multipolar regional trade environment,” he added. - FMT
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