A sharp escalation in tensions with the US has stoked fears in China of a deepening financial war that could result in it being shut out of the global US dollar system — a devastating prospect once considered far-fetched, but now not impossible.
Chinese officials and economists have in the past few months been unusually public in discussing worst-case scenarios under which China is blocked from US dollar settlements, or Washington freezes or confiscates a portion of China’s huge US debt holdings.
Those concerns have galvanized some in Beijing to revive calls to bolster the yuan’s global clout as it looks to decrease reliance on the greenback.
Some economists even float the idea of settling exports of China-made COVID-19 vaccines in yuan, and are looking to bypass the US dollar with a digital version of its currency.
“Yuan internationalization was a good-to-have. It’s now becoming a must-have,” said Shuang Ding
(丁爽), head of Greater China economic research at Standard Chartered and a former economist at the People’s Bank of China (PBOC).
The threat of financial “decoupling” is becoming “clear and present,” Ding said.
Washington has unleashed a barrage of actions penalizing China, including proposals to bar US listings of Chinese companies that fail to meet US accounting standards and bans on the Chinese-owned apps TikTok and WeChat.
Further tension is expected in the run-up to the US presidential elections on Nov. 3.
“A broad financial war has already started ... the most lethal tactics have yet to be used,” said Yu Yongding (余永定 ), an economist at the state-backed Chinese Academy of Social Sciences who previously advised the PBOC.
Yu said the ultimate sanction would involve US seizures of China’s assets in the US — Beijing holds over US$1 trillion yuan in US government debt — which would be difficult to implement and a self-inflicted wound for Washington.
However, while calling US leaders “extremists,” Yu said a decoupling was not impossible, and China should make preparations.
China Securities Regulatory Commission Vice Chairman Fang Xinghai (方星海) said China is vulnerable to US sanctions and should make “early” and “real” preparations.
“Such things have already happened to many Russian businesses and financial institutions,” Fang said at a forum in June organized by Chinese media outlet Caixin.
Guan Tao (管濤), former director of the international payments department of the Chinese State Administration of Foreign Exchange also said Beijing should ready itself for decoupling.
In a report he coauthored last month, Guan called for increased use of China’s yuan settlement system, Cross-Border Interbank Payment System, in global trade. Most of China’s cross-border transactions are settled in US dollars via the SWIFT system, which some say leaves it vulnerable.
The death of a former head of China’s one-child policy has been met not by tributes, but by castigation of the abandoned policy on social media this week. State media praised Peng Peiyun (彭珮雲), former head of China’s National Family Planning Commission from 1988 to 1998, as “an outstanding leader” in her work related to women and children. The reaction on Chinese social media to Peng’s death in Beijing on Sunday, just shy of her 96th birthday, was less positive. “Those children who were lost, naked, are waiting for you over there” in the afterlife, one person posted on China’s Sina Weibo platform. China’s
‘NO COUNTRY BUMPKIN’: The judge rejected arguments that former prime minister Najib Razak was an unwitting victim, saying Najib took steps to protect his position Imprisoned former Malaysian prime minister Najib Razak was yesterday convicted, following a corruption trial tied to multibillion-dollar looting of the 1Malaysia Development Berhad (1MDB) state investment fund. The nation’s high court found Najib, 72, guilty on four counts of abuse of power and 21 charges of money laundering related to more than US$700 million channeled into his personal bank accounts from the 1MDB fund. Najib denied any wrongdoing, and maintained the funds were a political donation from Saudi Arabia and that he had been misled by rogue financiers led by businessman Low Taek Jho. Low, thought to be the scandal’s mastermind, remains
‘POLITICAL LOYALTY’: The move breaks with decades of precedent among US administrations, which have tended to leave career ambassadors in their posts US President Donald Trump’s administration has ordered dozens of US ambassadors to step down, people familiar with the matter said, a precedent-breaking recall that would leave embassies abroad without US Senate-confirmed leadership. The envoys, career diplomats who were almost all named to their jobs under former US president Joe Biden, were told over the phone in the past few days they needed to depart in the next few weeks, the people said. They would not be fired, but finding new roles would be a challenge given that many are far along in their careers and opportunities for senior diplomats can
Australian Prime Minister Anthony Albanese yesterday announced plans for a national bravery award to recognize civilians and first responders who confronted “the worst of evil” during an anti-Semitic terror attack that left 15 dead and has cast a heavy shadow over the nation’s holiday season. Albanese said he plans to establish a special honors system for those who placed themselves in harm’s way to help during the attack on a beachside Hanukkah celebration, like Ahmed al-Ahmed, a Syrian-Australian Muslim who disarmed one of the assailants before being wounded himself. Sajid Akram, who was killed by police during the Dec. 14 attack, and
RSS