CHINA TAKES THE YUAN GLOBAL IN BID TO REBEL A WEAPONISED DOLLAR

 

CHINA TAKES THE YUAN GLOBAL IN BID TO REBEL A WEAPONISED DOLLAR

 

 

                              America is one of a kind in the economic, political, and military spheres of the world. One of the main reason America is so powerful is the value of its currency in the world economy and the power America gained through Petrodollar system. Now many countries and world currencies are coming forward against the American Dollar. The trade or any other business deals in between Russia and China have decided to be carried out in the Yuan Renminbi, which is now the Chinese currency. The BRICS countries which include Brazil, Russia, India, China, South Africa are likely to come forward as a new common currency, in which they too a step towards de-dollarization. There are also reports that many countries are starting to use other currencies instead of using the American dollar for their trade. In this way American dollar tend to lose its status as the “World Reserve Currency”. This is called De-Dollarization.

All the countries in the world have their own central banks. All these banks have a foreign exchange reserve, in such exchange reserves, the foreign currency that they keep in large amount is called the reserve currency and in this 60% of the world’s foreign currency is kept in the American dollar. That’s why it has become the World’s Reserve Currency. According to a research paper published by IMF, there are three things which make the currency eligible to become the world reserve currency. First one is the good governance, then the economic stability and finally the openness in international trade. By having these eligibility, a country’s financial system should be in a good way, country should have good peace, democracy should exist, fast growing economy, value of the currency should be significant etc. So, after the second world war, the country which qualifies the three eligibility was America.

A spark for the de-dollarization was initiated in 2014, when Russian invaded Ukraine and Russia entered into discussion with China to bypass US dollar and use the Chinese currency Yuan Renminbi. So, after 2014, the use of Yuan Renminbi, for the trade between Russia and China have significantly increased.

Now China is putting its currency in front in all possible ways against American dollar. President Xi Jinping’s Government has been trying hard to act as a catalyst in enhancing the value of Yuan by entering into new agreements linked to the renminbi stretching from Russia and Saudi Arabia to Brazil and even France. While US still remain as the financial hegemon, through this movement, China can carve out a bigger place for itself in the international financial system.

            The use of Yuan Renminbi in the contracts for everything from oil to nickel is attain speed as the currency’s share of global trade finance tripling since 2019. Still its only a tiny part of the whole and it is strictly controlled by the Chinese authorities. And now it is going global. The reputation is now been promoted abroad.