Review | China’s Trump Card: Cryptocurrency and Its Game-Changing Role in Sino-US Trade
- Economist Raymond Yeung’s book offers a ‘provocative’ idea to fix the widening trade imbalance
- Creating a globally used digital currency would weaken the US dollar, making the suggestion nearly impossible to implement in the real world
The US dollar will cease to be the de facto world currency as globalisation retreats, so China and the United States should work together to create a globally used cryptocurrency – a strategy that would weaken the dollar, encourage American exports and help balance trade between the two superpowers.
These are the main takeaways from China’s Trump Card: Cryptocurrency and Its Game-Changing Role in Sino-US Trade, by Raymond Yeung, the chief Greater China economist at ANZ Bank. Yeung offers a novel, and somewhat wishful, proposal to one of the world’s most complicated and significant problems – the economic rivalry between the US and China.
The book starts by analysing the contentious issue of how China can reduce its reliance on the US-dominated financial system, and goes into whether China will be able to end the US dollar’s dominance that enables Washington to threaten financial sanctions against Chinese firms and individuals.
The author argues that China will continue to gradually cut the dollar holdings in its foreign exchange reserves, as well as reduce its use of dollars in cross-border trade and investment. However, the yuan has little chance of replacing the US currency, even though it is in the process of losing its anchor currency role. Given this situation, it would be of mutual benefit to China and the US to agree on the creation of a blockchain-based international cryptocurrency, Yeung said.
With a [global] cryptocurrency, international balance becomes more ‘balanced’
The new universal currency, he writes, could put an end to the main portion of traditional trans-Pacific financial flows, namely China earning hundreds of billions of dollars from its exports to the US each year and then reinvesting those dollars in US financial instruments such as US Treasury securities, enabling the US to borrow cheaply and buy more. But if bilateral trade were to be settled in a super sovereign currency, it could help strike a new balance in trade and financial flows, the author argues.
“With a cryptocurrency, international balance becomes more ‘balanced’,” he writes.