What China Just Did Is About To Turn The Tables On The US Dollar, And Its Changing Everything

What China Just Did Is About To Turn The Tables On The US Dollar, And Its Changing Everything You might have noticed that the US dollar has been the go-to currency for international trade for decades. But lately, things are changing. Countries, especially China, are starting to look for alternatives. First off, what exactly is de-dollarization? Simply put, it’s the process of reducing reliance on the US dollar in international trade and finance. Historically, the dollar has been the kingpin, dominating about 88.5% of all foreign exchange transactions as of 2022. But in recent years, we’ve seen a shift, particularly with China pushing for more transactions in its currency, the yuan. Back in 2010, a mere 1% of China’s cross-border payments were settled in yuan. Fast forward to March 2024, and that number soared to over 52.9%! That’s a huge leap in just a little over a decade. Countries like Brazil and Argentina have started accepting yuan for trade, which is a big deal for China’s global ambitions. If You Like This Video; Like, Share, Comment And Subscribe. This Means A Lot To Us! Thanks For Watching Our Video: What China Just Did Is About To Turn The Tables On The US Dollar, And Its Changing Everything China is working to reduce its dependence on the US dollar in international trade and finance. This move is influenced by geopolitical tensions, economic sanctions, and a desire for more financial independence. Recently, China signed new trade agreements with countries like Brazil, Russia, and members of ASEAN, focusing on using local currencies instead of the US dollar. The Chinese government is pushing the yuan (CNY) as a global currency. The People's Bank of China (PBOC) reported a rise in yuan-denominated transactions, especially in energy markets. This includes deals with oil-exporting countries to accept yuan for oil payments, boosting the yuan's role in global trade. China’s digital yuan (e-CNY) is also gaining momentum. In 2024, pilot programs for international transactions began, letting foreign businesses settle trades in digital yuan. This is part of China’s strategy to make the yuan more appealing and usable worldwide. China is also enhancing the offshore renminbi market, particularly in Hong Kong, which handles a lot of yuan-denominated transactions. They are offering more products like yuan-denominated stocks and bonds to attract international investors. In early 2024, China sold about $53.3 billion in US Treasuries, marking its largest single sell-off. This ongoing trend saw China reduce its US Treasury holdings by $227 billion in February 2024 alone, lowering total holdings to about $775 billion. This sell-off is partly a response to increasing tensions with the US, including trade disputes and sanctions. It is a way for China to reduce risks tied to US economic policies and potential sanctions. China's gold reserves have also grown, reaching tons in early 2024. This gold accumulation is part of a broader strategy to diversify reserves away from the dollar and strengthen the yuan's stability as a global currency. Now, let’s talk about the yuan’s journey. In 2016, the International Monetary Fund (IMF) included the yuan in its Special Drawing Rights (SDR) basket, which was a significant milestone. It was like getting a VIP pass to the global currency party. But it hasn’t been all smooth sailing. China faced a bit of a crisis in 2015-2016 when speculators started betting against the yuan, fearing an economic slowdown. The People’s Bank of China (PBOC) had to step in to stabilize things. They used their reserves to support the yuan, which was crucial but also highlighted the challenges of promoting the currency globally. After that crisis, China shifted its strategy. Instead of pushing for full-blown de-dollarization, they focused on developing systems that allow businesses to settle trades in yuan. This meant creating offshore yuan clearing centers and expanding currency swap agreements with other countries. It’s like building a bridge to make it easier for others to use the yuan. However, China also tightened capital controls to maintain financial stability. This was a double-edged sword. On one hand, it helped protect the economy; on the other, it made some foreign investors wary. It’s a balancing act that China is still trying to perfect. More Details In The Video