Text: Yan Ansheng
Today's world is undergoing a great change unseen in a century, which is reflected in the international financial market and the international monetary system, that is, the pattern of the dominance of the US dollar is being broken, the old international financial order is being changed, the situation of the US dollar eating the world will become history, and the recession of the US dollar has become inevitable.
Since the Bretton Woods Conference in 1944 established the US dollar and the ** peg, the US dollar has been established as the hegemon of the global currency, although in 1971 the United States ** Nixon announced the decoupling of the US dollar from **, but the US dollar is still across the world, becoming the world's most important international settlement currency, reserve currency, although the yen was all the rage in the eighties of the last century, the rise of the euro at the beginning of this century, and even the momentum of challenging the hegemony of the US dollar, but the United States through various intrigues, The upward momentum of the yen and the euro was suppressed, and the hegemony of the dollar was perpetuated to this day. However, time has passed, the world economic and financial landscape has changed dramatically, the foundation of the dollar's world domination is shaking, and the dollar has gone downhill from its peak.
The hegemony of the dollar flourished and declined
1. The U.S. economy is unsatisfactory, the U.S. dollar is turning from real to virtual, gradually bubbles, and the foundation of U.S. dollar hegemony is shaking. Although the United States is still the world's largest economy and ranks first in the world in terms of GDP, the data hides problems that the US economy is difficult to overcome. The real economy in the United States accounts for only 10%, and the future of the manufacturing industry in the United States is bleak; The U.S. has a mountain of debt, and its ability to regulate the economy is minimal; The capitalists in the United States are keen on financial bubbles and have no interest in developing the American economy; The United States is wielding the stick of sanctions everywhere in the world, shooting itself in the foot. The American class is serious, political confrontation is intensifying, and social contradictions are difficult to reconcile. Although the GDP of the United States has increased unabated against the background of the United States' large-scale money printing, the US economy has not grown substantially, which is reflected in the deterioration of the international competitiveness and influence of the US economy, and the weakening of its support for the US dollar. At present, the recession of the US economy is still in the stage of quantitative change, and once there is a substantial turn, the collapse of the hegemony of the dollar will also be staged randomly.
2. The U.S. interest rate hike is unsustainable, and the dilemma is that it harms others and itself, and the dollar's decline is irreversible. The Fed's play of raising interest rates and cutting interest rates has always been an important means for the United States to harvest the world, and it is also an important manifestation of the hegemony of the dollar. For a long time, the Federal Reserve has repeatedly raised interest rates and cut interest rates, which not only allowed the United States to transfer the crisis to the world and harvest the world's wealth, but also consolidated the hegemony of the dollar. However, since the outbreak of the financial tsunami in the United States in 2008, the Federal Reserve's interest rate hike and interest rate reduction measures have begun to become more and more ineffective, first of all, China's interest rate policy has not danced with the Federal Reserve, and so far more and more countries including China, Russia, Turkey, Iran, etc. have broken away from the baton of the dollar, and it is becoming more and more difficult for the United States to harvest the world's wealth. Especially since 2022, the aggressive interest rate hike measures taken by the United States have not been as effective as before, not only the monetary policies of China, Turkey and other countries have gone in the opposite direction, but also the domestic economy of the United States has also suffered from aggressive interest rate hikes, inflation control has not reached the expected target, the banking industry in the United States has seen a wave of failures, and the operating costs of enterprises have risen significantly. The U.S. interest rate hike is already in a dilemma and unsustainable. This shows that the Fed's tricks of raising interest rates and cutting interest rates have become more and more difficult, and it also shows that the status of the dollar has been greatly weakened and showing a declining trend.
The Fed's interest rate hikes and cuts are starting to get less and less effective.
3. The petrodollar is not in good times, the wave of de-dollarization is sweeping the world, and the dollar system is embattled. At present, all countries in the world have realized that the dollar has become the biggest scourge of global finance, therefore, the United States-controlled International Monetary Organization and the World Bank are facing the increasing demand for reform from member countries, requiring the destruction of the monopoly position of the United States and the promotion of the voice of other members. What is even more a headache for the United States is that the international settlement currency is showing a trend of diversification, the petrodollar settlement system that supports the hegemony of the US dollar is being broken, and the petroyuan, the petroruble, and the petroeuro are coming one after another, and the petrodollar, the most important pillar of the US dollar, is becoming more and more fragile and unreliable. At present, the trend of global multipolarization is not only manifested in the political and economic fields, but also in the financial field, and the whole world does not want the US dollar to dominate the world and harm the world, therefore, the global mainstream public opinion and forces are promoting the multipolarization of international finance and international currency, which is an irresistible trend of the United States and the dollar!
The Romance of the Three Kingdoms in the US dollar, the euro, and the Chinese yuan
In recent years, the US dollar, the euro and the renminbi have shown an obvious pattern of trade-offs. According to the Society for Worldwide Interbank Financial Telecommunication, the euro's share in international settlements fell to 24 in July this year4%, the lowest point on record, while the share of the US dollar in international settlements rose to 46%, and the share of the renminbi in international settlements rose steadily to 3.0% for the sixth consecutive month06%。Europe** noted that the increase in the share of the US dollar was the result of a decrease in the share of the euro. Some financial experts pointed out that the statistics of the Association for Worldwide Interbank Financial Telecommunication on the proportion of RMB do not truly reflect the status of RMB in the international settlement system, because China has its own RMB international settlement system and the number is very large, if China's RMB international settlement system data are counted, then the proportion of RMB in international settlement will be greatly increased.
In fact, in today's international monetary system and international financial markets, although the US dollar is still in a hegemonic position, the US dollar, the euro and the renminbi have formed a three-legged trend, which cannot replace each other, and are showing a trend of eliminating the advantages of one or the otherFirst of all, it is manifested in the loss of the renminbi against the US dollar and the euro. As mentioned above, the RMB is not only expanding rapidly in China's own international settlement system, but also the proportion of RMB used in settlement between China and other countries has exceeded the proportion of the US dollar, and the relationship between RMB and the US dollar is becoming more and more obvious, and has become an irreversible trend. Moreover, whether it is the statistics of the Society for Worldwide Interbank Financial Telecommunication or the adjustment of the weights of the International Monetary Organization's basket of currencies, the position of the euro is declining significantly, while the position of the renminbi is rising significantly. In May 2022, the IMF changed the weight of the renminbi in the SDR from 1092% to 1228%, and the weights of the euro, pound sterling and yen have been lowered. As an international currency, although the renminbi cannot compete with the dollar and the euro, the rise of the renminbi has become unstoppable.
The dollar and the euro have already started to decline.
Secondly, the dollar and the euro are going downhill, while the yuan is like the sun rising in the morning. Today, although the dollar is still invincible, and the euro is far from reaching the point of collapse, both currencies are facing great troubles and challenges, the dollar is not only facing the threat of a recession in the United States, but also is experiencing an unprecedented wave of de-dollarization, more and more countries and international organizations have joined or are joining the de-dollarization alliance, and the hegemony of the dollar is being challenged like never before. The euro is at risk of the expansion of the Russia-Ukraine war, coupled with the fact that the United States is suppressing the euro all the time, and the eurozone is not united, each with its own small calculations, which makes the European economy difficult, so the future of the euro is worrying. On the contrary, China's economy is like a vast ocean, is the world's best performing economy, RMB is also the world's most stable currency, now more and more countries and regions accept the use of RMB for settlement, more countries have signed currency swap agreements with China, and RMB is becoming an important reserve currency for more and more countries and international organizations. In short, in stark contrast to the US dollar and the euro, the renminbi is making great strides towards the world and becoming the new upstart of the international currency.
Third, the internationalization of the renminbi has been comprehensively promoted, and the new international financial organization and regional cooperation mechanism are poised to boost the internationalization of the renminbi. RMB internationalization has become an important strategic goal of China's economy to participate in international competition and cooperation, in recent years, China has been working hard to promote the formation of the RMB exchange rate market-oriented mechanism, at the same time, spare no effort to promote the use of RMB in international settlement, China has not only built a RMB as the settlement currency of the oil market, iron ore and other commodity markets, but also built the RMB International Settlement System (CIPS). In particular, the establishment of new international financial organizations such as the Asian Infrastructure Investment Bank, the BRICS Investment Bank, and the Silk Road** led by China has not only broken through the limitations of the financial hegemony of the United States and Europe, but also opened up a new path for the internationalization of the RMB. In the past ten years, China has signed more than 200 cooperation documents with 152 countries and 32 international organizations to jointly build the "Belt and Road", covering 83% of China's countries with diplomatic relations. At the same time, since the RCEP officially ran for more than a year, the economic and trade exchanges between China and ASEAN and its member states have been significantly strengthened, and the Belt and Road cooperation platform and the RCEP cooperation mechanism will become a booster for the internationalization of the RMB, which is providing strong support for the RMB to be comparable to the US dollar and the euro!
Sooner or later, the renminbi will be on par with the dollar
The renminbi is steadily advancing the pace of internationalization, however, in the traditional international financial system and financial order controlled by the United States, the renminbi will never come to an end, and will only become a vassal of the dollar like the euro, the yen, and the pound. In particular, it should be pointed out that the current status of the renminbi in the international arena is quite disparity and mismatch between the status of the renminbi in the international arena and that of the Chinese economy, which is a difficult problem that needs to be broken through in the process of renminbi internationalization. Although the status and influence of the renminbi in the international arena cannot be compared with the US dollar, and even there is a big gap with the euro, the potential and space for the international development of the renminbi are infinitely broad, and within 30 years or even less, the renminbi can not only catch up with the euro, but also be comparable to the US dollar. The strength of the renminbi is mainly in the following three aspects:
First, China's economy will provide increasingly strong support for the renminbi. At present, China's economy has become the world's second largest economy, and if according to the calculation of the International Monetary Organization, according to the purchasing power evaluation standard, China has surpassed the United States to become the world's largest economy many years ago. At present, China's economy is embarking on the road of high-quality development in an all-round way, scientific and technological innovation and progress are changing with each passing day, whether it is in the field of key technologies or high-end industries, China is constantly achieving breakthroughs, which not only greatly dissolves the technological blockade and industrial blockade of China by the United States and the Western world, but also opens up more and more new development tracks to lead the world. It will not be long before China will not only surpass the United States to become the world's largest in terms of economic aggregate, but also surpass the United States in terms of scientific and technological innovation and high-end industrial development. In the process of China's economy becoming the leader of the world economy, the support of the renminbi as an emerging international currency will become stronger and stronger, and the support of China's national strength for the renminbi will be greater than that of the United States for the dollar. With the support of China's national strength, the renminbi will surely become the most trusted currency in the world, and the renminbi becoming the world's most popular currency will also be the logical inevitability of the global economy and global financial development.
China's economy will provide strong support for the renminbi.
Second, China has bypassed the US dollar and started from scratch to build a new system for the internationalization of the renminbi. The essence of dollar hegemony is to eliminate the challengers of the dollar and remove the threat of the dollar forever, so that the United States can always become a country and a superior person in this world. The fate of the yen and the euro dominated by the United States shows that if the renminbi is to become China's independent international currency and eventually compete with the dollar and the euro, it must break through the restrictions and suppression of the United States, specifically, it is necessary to establish its own international circulation, settlement, and reserve system in addition to the international monetary system dominated by the United States. In fact, more than ten years China has been working towards this goal, as early as April 2012 China is beginning to establish a RMB cross-border payment and clearing system, that is, we use the English abbreviation of CIPS, in October 2015 CIPS was officially launched, in the past eight years, CIPS has grown rapidly, the scale has expanded dramatically, has become an important influence in the global financial market of the international payment and clearing system. Not only that, China began to brew petroleum RMB settlement as early as 2001, and after 17 years of exploration, it finally launched the RMB-denominated ** in March 2018 and officially launched trading on the Shanghai ** Exchange, and now RMB oil ** has become the world's third largest oil ** market after North Sea Brent oil ** and New York WTI ***. At the same time, China has blazed a trail for the internationalization of the renminbi by leading the establishment of new international financial organizations such as the Asian Infrastructure Investment Bank, the BRICS Development Bank, and the Silk Road**. In addition, China has vigorously promoted the global circulation and use of the renminbi by signing currency swap agreements with countries around the world. The renminbi is entering the world financial stage with a new independent attitude, and is striding from the peripheral supporting role to the central protagonist.
Third, the international community has suffered from the US dollar for a long time, and the rise of the renminbi is the expectation of the international community. Since the Bretton Woods Conference, the United States has continued to play with the hegemony of the dollar to harvest the world's wealth and harm the whole world; not only the developing countries have a deep hatred for the hegemony of the dollar, but also the allies of the United States, especially the countries of the euro zone, also hold a grudge against the hegemony of the dollar, but both the developing countries and the Western allies of the United States have nothing to do about the hegemony of the dollar, and the root cause of this lies in the fact that the United States has military bases in many countries and regions in Europe and Asia, and the United States can carry out military threats or create turmoil against relevant countries and regions at any time through military hegemony, are under the control of the United States in the middle and low end of the global industrial chain, in fact, under the control of the United States economy, therefore, all along, although the countries and regions of the world are well aware of the dollar harvest of their own wealth, but have been suffering from no way out, and even dare not speak out. However, time has passed, China's rise has broken the world pattern of the United States' monopoly on one superpower, the United States is not only militarily helpless against China, but also in recent years the United States has launched a series of first-class wars, scientific and technological wars, financial wars, and first-class wars against China have been declared defeated. It is necessary to reconstruct the new pattern of global international finance, open up a new path for the internationalization of the renminbi, let the renminbi compete with the US dollar in the international arena, and provide a new currency choice for all countries and regions in the world. Let the RMB go to the world, comparable to the US dollar, is not only the internal requirement of China's economic development, but also the common expectation of all countries in the world, the RMB into an international currency comparable to the US dollar can be said to be the hope of the people of the world, all countries in the world are looking forward to the early arrival of the day when the RMB is comparable to the US dollar!
It is a conservative estimate that within 30 years at the latest, when the total size of China's economy is three to four times that of the United States, the RMB will be comparable to the US dollar, and it is optimistically estimated that in about 20 years, when China's economic size is more than twice that of the United States, the RMB will catch up with the euro and the US dollar or will come in advance!
(The author is the vice chairman of the Hong Kong Periodicals Media Association).