There’s nothing sudden about what China’s been doing with its trade surplus. In the aughts they were spending most of it on US treasuries. After the great financial crisis they began tapering their purchases and shifting to a basket of other currencies. In the mid 2010’s they started the belt and road initiative to turn trade surplus into loans and infrastructure in foreign countries. It’s been at least 15 years of them pulling away from the tight coupling they had with USD.

Let's not fool ourselves, the USD is a shitty reserve currency.

But: It's amazing that otherwise smart people don't understand that china manipulates their currency worse than the US. How do people think that the evergrande crisis just disappeared? Magical econ dust?

I don't doubt that corrupt regimes can be bought off to the yuan, but it's hard to imagine seeing that going well for them:. USD M2:GDP hovers around 1, RMB M2:GDP is currently around 2.

Even worse, RMB has extreme capital controls. It's difficult for individuals to get RMB out of PRC, because the regime is terrified of capital flight. It's hard to predict what effect this would have on a reserve currency.

They are putting forwards a proposal for bilateral trade (and have proposed a dynamic basket of currencies as a reserve previously). The alternative being explored is not a 1-1 replacement of the USD with the Yuan.

Additionally, from the perspective of much of the world, the US has been engaging in pretty sizeable currency manipulation in the past 3 years.