China is taking multibillion-dollar transactions away from the international currency that has underpinned them for generations, the US dollar, and pushing them into the yuan.
First, there was oil in Saudi Arabia, then there was nuclear power in Bangladesh and, finally, there were railways in Pakistan.
Its centrality meant that, to trade, governments had to navigate international standards or be exposed to sanctions. Now that is under threat.“All this could create an opportunity for certain countries seeking to reduce their dependency on Western payment systems and currency frameworks – be that for reasons of political preference, financial dependencies, or because of the use of financial sanctions in the past decade,” Lagarde said..
The People’s Bank of China building in Beijing. The Chinese currency is making inroads into global trade.“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” US Treasury Secretary Janet Yellen said last week. “Of course, it does create a desire on the part of China, of Russia, of Iran, to find an alternative.
But the campaign is also reaching a wider audience sympathetic to what it sees as an over-dominance of the American financial system. They are worried it could put other economies at risk if there is a conflict between China and Taiwan in the coming decade.
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