Russia abandons the dollar? Rejection of RMB, three major difficulties in RMB internationalization!
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After the end of World War II, the US dollar took over as an important pillar of the US hegemonic system. With the help of the US dollar, the United States is able to quietly extract the world's wealth.
However, the US dollar, as the leader of US hegemony, also means that once the US power declines, the position of the US dollar will be impacted. After all, no independent country wants to allow the Americans to easily plunder the fruits of the labor of their own people with a piece of paper.
In the past, we endured the exploitation of the United States and accepted the dollar to control the global monetary system because we were not strong enough. Now, with China's full-scale rise, the renminbi has the potential to challenge the hegemony of the dollar and become the new international currency.
At the same time, Russia, which realizes that it cannot be truly recognized by Europe and the United States, is also actively moving closer to us, hoping to achieve mutual benefit and win-win results with us economically.
Although the internationalization process of the renminbi has achieved certain results, it still needs to overcome three major challenges: the ** deficit, foreign exchange controls and the dominance of the US dollar in the world economic system.
These challenges will undoubtedly have a profound impact on China's economy, so the internationalization of the renminbi is bound to be bumpy and difficult.
In 2022, Russia** announced that it would stop using the US dollar in its oil and gas after suffering multiple rounds of sanctions from the United States. At the same time, China has also taken measures to sell $173.2 billion in U.S. bonds, and there are reports that China will continue to spend about $700 billion in U.S. bonds in 2023.
These actions show that the renminbi is gradually moving international.
The United States was shocked by this, accusing Russia and China of trying to weaken the economic position of the United States. In fact, the reason why the United States has been able to maintain its hegemony after accumulating more than 30 trillion dollars in national debt is mainly dependent on petrodollars.
Oil must be traded in the US dollar, which makes the world closely linked to the US dollar. At the same time, the United States** will also reap the world's wealth by adjusting the dollar exchange rate to force other countries to take over the debt of the United States.
This is a tactic commonly used by the United States in the face of a domestic economic crisis.
Are countries around the world obliged to take over this order? This time, China and Russia are not only no longer keen to take over, but also want to try to break the trap of the dollar. In this challenge to the dollar, our country has long been fully prepared for this battle in relation to Russia.
Back in 2008, it was the Beijing Olympics, which was an important step for the renminbi to go global.
The 2008 Beijing Olympics showed the world that paper money, although it has no value in itself, has a universal exchange value in the market, and people can exchange paper money for everything they need.
Through the Beijing Olympic Games, China has proved to the world that China has the strength to produce all the products needed by all countries, whether it is heavy weapons such as missiles and fighter jets, or daily necessities such as clothes and stationery.
With RMB, you can also buy everything you need, and the quality is good, and it is fair. Although the US dollar is a global currency, this does not mean that people around the world are willing to accept it.
In fact, for all countries outside the United States, the use of the U.S. dollar means that the U.S.** can control their wealth by adjusting the dollar exchange rate. So let's ditch the shackles of the dollar, choose a more people-friendly renminbi, and buy what we need freely.
It would be a wonderful deal to exchange currencies directly with China, skipping the "black-hearted intermediaries" of the US dollar. In 2008, the People's Bank of China seized the opportunity of the Olympic Games to set up an offshore market exchange rate department dedicated to promoting the internationalization of the renminbi.
China and Russia jointly tried to bypass the dollar and exchange money directly, which led to the flow of about 180 billion yuan into the Russian market. Since then, China has actively participated in international and overseas aid development with its strong industrial system.
With the spread of Chinese goods and technology around the world, the influence of the renminbi in the international community has gradually increased.
The status of the currency is due to the strength of the issuing country. Whether it is the pound, the US dollar or the rising renminbi, it is inseparable from the support of strong national industrial strength.
Only a strong industrial strength can create a strong armed force for the country and ensure its position and influence in the world. At the same time, it can also produce a variety of goods that meet the needs of the people and ensure the stability of the currency.
The British pound, which once dominated the world monetary system, has British industry, known as the "world's factory", in addition to the British Royal Navy. The same is true for the dollar, but the basis of dollar hegemony lies not only in the industrial power of the United States, but also in another key resource that can control the globe - oil.
General equivalents can be circulated in the market, such as **, the US dollar, and oil. The hegemony of the dollar was established in the heyday of the Bretton Woods system in the 70s of the 20th century by being linked to **.
At the initiative of Charles de Gaulle, France led European countries to launch a "**return" campaign, exchanging a large number of dollars into **. Then, in the Third Middle East War, because of their dissatisfaction with the United States' support for Israel, Arab countries jointly cut oil production, which led to a sharp increase in the cost of industrial production in the United States, and it was no longer possible to maintain the hegemony of the dollar under the gold standard.
The dollar crisis gave birth to the petrodollar system, and the United States tied the dollar to oil, successfully saving the dollar and making it the world currency. Today, the fact that most international oil** still needs to be settled in US dollars has cemented the dollar's position in the global monetary system.
Oil, as the blood of industry and an indispensable energy source for all countries, binds oil to the dollar, so that the position of the dollar is still solid.
Although countries such as China, the European Union, and Japan have complete industrial systems, they struggle to gain an advantage against the dollar due to their lack of sufficient oil resources and being constrained by the military and political maneuvers of the United States.
Russia, on the other hand, has abundant oil resources, but after the collapse of the Soviet Union, its industrial strength has suffered greatly, and it cannot challenge the position of the dollar alone. As a result, the close relationship between the dollar and oil gives it an unshakable position in the international currency market.
Is there really no way to challenge the position of the dollar? Of course not! The key to beating the dollar is a strong industrial system. China's current industrial system can already meet the needs of most countries and people in the world.
When it comes to oil, while the United States controls most of the world's origins, its control is not impregnable.
In the current oil industry, the oil reserves in the Persian Gulf region of the Middle East occupy an absolute advantage, and its proven reserves reach 1012700 million tons, accounting for 2 3 of the world's total reserves.
Although North and Central and South America are controlled by the United States, West and North Africa are under the influence of France, most of Europe is in Russia, and the oil-producing regions of the Asia-Pacific region are mainly in China, none of these regions together have comparable oil reserves to those in the Persian Gulf region of the Middle East.
Control of oil in the Middle East was crucial to the industrial lifeblood of the world, which is one of the reasons why the United States and the Soviet Union settled Jews in the Middle East after World War II. Behind the Middle East wars from 1948 to 1982 was actually a contest between the United States and the Soviet Union.
In order to control the oil in the Middle East, the United States not only took the initiative to create tensions in the Middle East, but also directly overthrew the Iraqi Saddam regime it supported in 1990.
For the sake of Kuwait, the Americans used huge military forces, including 100,000 sorties, 200,000 tons of bombs, 700,000 army forces, and six aircraft carrier battle groups.
Is this pomp and circumstance a bit exaggerated? In fact, Iraq is not strong enough for the United States to take such large-scale action, and this kind of action is a clear signal that the United States wants to solve the problem once and for all.
On the face of it, it does not seem worthwhile to launch such a large-scale operation against Kuwait. But it was Saddam Hussein** who tried to reach an agreement with other Arab oil-producing countries to control oil production, which would weaken the position of the dollar.
Therefore, Saddam Hussein must be eliminated. This operation was a demonstration by the U.S. military to Middle Eastern countries that the U.S. military is capable of waging a war on the level of annihilation, even from thousands of miles away.
In the Gulf War, the United States was victorious by Iraq's losses, and so far, the United States has a solid position on the oil issue, and almost no Middle Eastern oil-producing countries dare to challenge it. However, there are two Middle Eastern oil-producing countries that still have forces that the United States fears, one of which is Saudi Arabia, which has Chinese Dongfeng missiles.
Although the Gulf War has made most countries feel powerless, countries with missiles and nuclear bombs may be able to withstand the United States in a conventional war.
Why should we fight a conventional war with the United States when we have missiles and nuclear bombs? If Saddam Hussein had 20 nuclear missiles at the time of the Gulf War, would the United States dare to start a war?
Iran has another important card, and that is the Gulf of Oman. The Persian Gulf is the world's oil depot, and the Gulf of Oman is the key to controlling the oil depot, through which more than 90% of the Middle East's oil needs to be transported abroad.
If there is a problem in the Gulf of Oman, the world's oil** will be cut in half. This fact is enough for the United States and the whole world not to dare to drive Iran to a corner. China is not alone in its fight against the hegemony of the dollar.
While the internationalization of the renminbi seems to have bright prospects, it will not be easy to replace the dollar. In the process of RMB internationalization, China needs to deal with three problems, two challenges and one dilemma.
* Deficit with exchange rate open. In order for the renminbi to go global, it is necessary to import a large number of foreign goods within a certain period of time so that the renminbi can circulate in the international market.
Just like one of the reasons why the United States is crazy about printing dollars, the dollar can only become a global currency if the dollar is large enough to support large-scale international transactions.
However, this will also lead to an increase in the ** deficit, a decrease in the export volume of goods, an increase in imports, and an increase in domestic employment pressure, as well as an impact on domestic production plants, triggering large-scale unemployment.
Many countries, such as the United Kingdom and now the United States, have transformed from industrial countries to financially dominant countries, which is closely related to the ** deficit.
Liberalizing exchange rate controls is a necessary step for the renminbi to go global. However, this will also expose the renminbi to the risk of being manipulated by international capital predators, which may lead to currency depreciation and repeat the mistakes of the Asian financial crisis.
For example, the currencies of Japan and South Korea, which used to have a maximum face value of 100 yuan, suffered heavy losses in the aftermath of the financial turmoil. Therefore, this issue must be approached with caution.
China is huge, and the financial shock will not be as tragic as that of Japan and South Korea, but it should not be underestimated. The enemy of the renminbi is not only the dollar, but also the order represented by the United States.
That's too much to cover! Most of the world's major economies, including China, use the U.S. dollar as foreign exchange reserves. If the dollar system collapses, the wealth that these countries have accumulated over the years will be significantly reduced.
In 2022, the share of the US dollar in circulation in the global market reached a staggering 40%, and its influence cannot be ignored. Once the dollar's position is challenged, the US-led International Monetary Organization will also face collapse, which will trigger a superstorm in global markets.
As the Americans say, the dollar has firmly controlled the world. Therefore, whether the Chinese people's currency can become an international currency depends on China's national strength in the final analysis.
In July 2022, the proportion of RMB in global currency payments has risen to the third, and 28 countries have accepted direct settlement in RMB, which marks that RMB is gradually going global.
In the future, the renminbi has the potential to shake the hegemony of the US dollar and break the hegemonic order of the United States for decades. This is an inevitable trend of history, and it is also an important symbol of China's march towards the world.