China’s wish to end US dollar dominance is unlikely to come true with no genuine challenger in the wings
- Washington’s moves to sanction both Chinese and Hong Kong officials over the national security law and Xinjiang have highlighted the power of the US dollar
- The US dollar has remained the dominant currency since the 1940s, with the euro and the yuan lagging behind in terms of global foreign exchange reserves
One thing that Beijing hates about the world is the dominance of the US dollar, and China has been working for over a decade to undermine its role in global trade and investment. But China’s wish to dethrone the US dollar as the main anchor currency may not come true any time soon even though it has weakened recently, analysts said.
China’s discomfort with the US dollar has become more acute recently with Washington’s moves to sanction both Chinese and Hong Kong officials while also threatening to punish financial institutions dealing with these individuals, including Hong Kong chief executive Carrie Lam Cheng Yuet-ngor.
China is also unhappy with the “exorbitant privilege” enjoyed by Washington because of the US dollar’s role as the main international reserve currency, particularly when the US Federal Reserve engages in monetary easing to address domestic economic woes, as it has done this year, effectively weakening the currency.
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US sanctions over national security law an ‘inconvenience’, says Hong Kong leader Carrie Lam
Beijing views the US Federal Reserve’s recent monetary moves as a way of shifting the cost of its domestic problems onto other countries, including China, by collecting seigniorage – a form of profit made by a currency issuer from the people who use it.
Guo Shuqing, the chairman of the China Banking and Insurance Regulatory Commission, also warned that the unprecedented stimulus might plunge the world into another global financial crisis.