The hegemony of the dollar is an important supporting force for the United States to become a world hegemon. By mastering global reserve currency status, the United States can exert influence on the global economy and profit from it. However, in recent years, there has been a gradual de-dollarization trend around the world, which means that the world is no longer dependent on the US dollar for settlement and reserve currency. China, Russia, Iran, India and other countries have all taken action to promote the process of de-dollarization.
As the world's second largest economy, China has actively promoted the internationalization of the renminbi and reduced its dependence on the U.S. dollar by trading renminbi directly with other countries**. At the same time, China has also strengthened bilateral cooperation with Russia, and through bilateral local currency swap agreements, it has realized the settlement in its own currency and got rid of its dependence on the US dollar.
Russia, the world's second-largest oil producer, has also begun to strengthen cooperation with China and India after being subject to economic sanctions from the United States, and has adopted non-dollar settlements. In addition, Russia has promoted cooperation with other countries, encouraging the use of other currencies for settlements.
Iran, as an oil power, has also been subject to economic sanctions by the United States. In order to get rid of dependence on the US dollar, Iran has strengthened its cooperation with Russia and other countries, and has begun to settle oil exports in other currencies.
India, the world's third-largest oil consumer, is also actively promoting de-dollarization. India has strengthened its cooperation with Russia, Iran and other countries, encouraging settlement in its own currency or other currencies and reducing its dependence on the US dollar.
Against this backdrop, more and more countries have begun to settle in non-US dollars, so that more than 20% of global oil transactions** no longer use US dollars. This is a huge challenge to the hegemony of the dollar and exacerbates the pressure on the United States.
The petrodollar is the key support of the dollar's hegemony and the most important part of the world. After World War II, the United States reached an agreement with Saudi Arabia and other Gulf countries, and Saudi Arabia agreed to settle its oil in US dollars** and invest oil proceeds in US dollars in the US Treasury market, thus strengthening the position of the US dollar.
However, as the global trend of de-dollarization intensifies, Saudi Arabia has also begun to consider abandoning its complete dependence on the US dollar and adopting other currencies for **settlement. In 2019, Saudi Arabia also said it was not considering settling oil transactions in currencies other than the dollar. But in January 2023, Saudi Arabia's finance minister, Mohammed al-Jadan, said that Saudi Arabia was willing to settle oil in various currencies, especially the euro and the Saudi riyal, rather than the dollar.
This means that if Saudi Arabia and other Gulf countries really abandon the petrodollar system, it will be a fatal blow to the hegemony of the dollar. The collapse of the petrodollar system will lead to the global oil ** no longer being dependent on the US dollar, the global demand for the US dollar will fall sharply, and the value of the US dollar may be rapid**.
The global hegemony and economic power of the United States depend on the stability of the hegemony of the dollar. However, as the global de-dollarization trend gradually takes shape, the United States faces enormous challenges and dilemmas.
First, if the United States continues to maintain global hegemony, it will require huge fiscal spending. With the growing domestic debt, the United States will have to face enormous fiscal pressure. Especially in the past three years, the US national debt has increased by more than $10 trillion, which is a worrying figure. The United States must rely on borrowing to pay more than $1 trillion a year in interest, depending on the stability of the dollar's hegemony.
Secondly, as the petrodollar system shakes, the position of the dollar will be weakened. If oil-exporting countries abandon the full use of US dollars, it will reduce the demand for US dollars, leading to a surplus of US dollars** and further eroding their value. This will raise questions about global dollar reserves, which could lead to a similar undervaluation or even sell-off of the dollar, exacerbating the decline of dollar hegemony.
In the end, the United States will lose the ability to control the global economy. As the global reserve currency, the US dollar is not only the most important settlement tool, but also the core of the financial market. The U.S. uses the dollar's position to impose sanctions on other countries and control global financial markets, but as de-dollarization intensifies, the U.S. will face more restrictions and constraints and lose its ability to control the global economy.
The loosening of the hegemony of the dollar has led to a gradual de-dollarization of the world. China, Russia, Iran, India and other countries are actively promoting the use of local currencies or other currencies for ** settlement, reducing dependence on the US dollar. The petrodollar system is also facing shaking, and Gulf countries such as Saudi Arabia are beginning to consider using other currencies to settle their oil**.
This is a huge challenge and dilemma for the United States. The U.S. needs to contend with huge fiscal spending, a surplus of dollars**, and a declining ability to control the global economy. If it cannot be effectively dealt with, the hegemony of the dollar will be further weakened, posing a threat to the international standing and economic stability of the United States.
However, the world is not limited to the existence of dollar hegemony. The global de-dollarization trend has also opened up more opportunities and options for other countries. Coordinating the international economic landscape and promoting diversified and balanced development are conducive to the healthy and sustainable development of the global economy.
For China, actively promoting the internationalization of the renminbi, strengthening cooperation with other countries, and reducing dependence on the US dollar is an important step to achieve economic independence and increase global influence. At the same time, China also needs to deepen reforms, strengthen the construction of the financial system, and improve the international convertibility and liquidity of the renminbi, so as to provide a solid foundation for the internationalization process.
All in all, the loosening of the hegemony of the dollar is an important signal of changes in the global economic landscape. All countries should actively respond to the situation, promote diversified and balanced development, and build a more stable, equitable and inclusive international economic order. In this process, China, as the world's second largest economy and the world's largest power, plays an important role, and needs to continue to strengthen cooperation with other countries to promote the sustainable development of the global economy.