Abacus | China has a golden opportunity to become Asia’s monetary power
As Beijing reduces its reliance on the US dollar for international trade, it may be seeking to overcome the yuan’s credibility problem by anchoring it to gold
That presents Beijing with a problem. The US$375 billion merchandise trade surplus that China ran with the US last year was far bigger than the US$165 billion overall current account surplus it ran with the rest of the world.
In other words, China needs the US dollars it earns by selling goods to America to pay for all the technologies it needs to license from other countries, and all the capital goods, hi-tech componentry and raw materials it must buy to power its economic development, including the 9 million barrels of oil it imports every day from the rest of the world.
With the Trump administration now aiming to squeeze China’s vital supply of US dollars, Beijing will be forced to react to the threat.