The Fed’s interest rate hike, coupled with the US-European sanctions derived from the Russian-Ukrainian war, have made developing countries worry that the hegemony of the US dollar will affect the stability of their own and international financial markets.
Christopher C., professor of political economy at Chamanade University, USA. Christopher McNally pointed out in an online forum of the East-West Center, a US think tank, that the US is China’s top three trading partners, and US dollar assets account for a large share of China’s foreign exchange reserves. Sanctions, expulsion from SWIFT, or freezing of foreign exchange reserves, therefore, actively develop the digital renminbi.
Christopher C., professor of political economy at Chamanade University, USA. McNairy. online pictures.
McNairy believes that the issuance of the digital renminbi by the central bank has many advantages. On the one hand, it can speed up the internationalization of the renminbi, improve the autonomy of the currency, and reduce the dependence on the US dollar; on the other hand, the digital renminbi can facilitate the supervision and tracking of the central bank, although digital technology From virtual currency, but unlike blockchain, this currency does not use decentralized technology. As for other benefits, it includes low cost, high efficiency, and reduction of counterfeit banknotes. For example, Eastern European companies export to China and switch to digital renminbi payments, which can save 10% of transaction costs, and the benefits are considerable.
At present, the digital renminbi pilot has expanded from the original “10+1” in China to 15 provinces and cities, a total of 23 regions. The central bank revealed in mid-July that as of the end of May, there were 4.567 million merchant stores supporting digital payments, and the cumulative digital RMB transactions were regarding 264 million, with an amount of regarding 83 billion yuan. McNairy believes that in the future, it will be expanded to the whole country. At that time, the central bank will be able to grasp all the cash flows in the country in real time, and it will be easy to trace the flow of funds, illegal money laundering and suspected illegal business activities, and it will also be able to monitor the pressure and risks of the financial system in real time, and fully grasp the major risks. Data analysis, early risk prevention.
As for whether the digital renminbi can end the hegemony of the US dollar, McNairy maintains a wait-and-see attitude. Although many people agree that the hegemony of the US dollar is on the decline, and digitization can help the renminbi to expand the market share of the international payment system, the US dollar still accounts for 60%, which is difficult to achieve in the short term. shake its vital position.
Article in The Economist. Screenshot of The Economist’s official website.
The Economist has a different view, arguing that rather than replacing the dollar as the world currency with the yuan, the Chinese government seems to prefer to spend time on other, more urgent tasks, such as establishing a set of convenient trade partners, A payment system that is difficult to block in the US.
For China, developing a digital yuan is more strategic than commercial. U.S. sanctions once morest Russia have fully demonstrated that Western powers can kick foreign banks out of SWIFT at any time, and the U.S. can prohibit its financial institutions from conducting transactions with sanctioned countries, making it impossible for banks in that country to settle payments in U.S. dollars. Digital RMB payments use neither U.S. dollars nor SWIFT, and can completely bypass commercial banking institutions.
However, The Economist cautioned that the United States might theoretically prohibit any entity wishing to retain access to the U.S. clearing system from using it, forcing the world to choose between the U.S. dollar and the digital yuan. Some analysts believe that the United States can limit the influence of digital currency by sanctioning physical companies that use digital currency.
Whether or not the digital renminbi can challenge the dominance of the US dollar, the future of the world will be the coexistence of multiple international currencies. University of California professor Barry Eichengreen pointed out in “Exorbitant Privilege: The Rise and Fall of the U.S. Dollar and the Future of Currency” (Exorbitant Privilege) in 2011 that the United States’ not so good international reputation and irresponsible international financial measures, Make other countries full of doubts regarding the dollar. With the evolution of the global political and economic situation, the future world will be a world where multiple international currencies coexist, and the traditional foundation of the US dollar’s monopoly privilege is gradually being eroded.
