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.
MONEY GRAB: People were rushing to collect bills scattered on the ground after the plane transporting money crashed, which an official said hindered rescue efforts A cargo plane carrying money on Friday crashed near Bolivia’s capital, damaging about a dozen vehicles on highway, scattering bills on the ground and leaving at least 15 people dead and others injured, an official said. Bolivian Minister of Defense Marcelo Salinas said the Hercules C-130 plane was transporting newly printed Bolivian currency when it “landed and veered off the runway” at an airport in El Alto, a city adjacent to La Paz, before ending up in a nearby field. Firefighters managed to put out the flames that engulfed the aircraft. Fire chief Pavel Tovar said at least 15 people died, but
LIKE FATHER, LIKE DAUGHTER: By showing Ju-ae’s ability to handle a weapon, the photos ‘suggest she is indeed receiving training as a successor,’ an academic said North Korea on Saturday released a rare image of leader Kim Jong-un’s teenage daughter firing a rifle at a shooting range, adding to speculation that she is being groomed as his successor. Kim’s daughter, Ju-ae, has long been seen as the next in line to rule the secretive, nuclear-armed state, and took part in a string of recent high-profile outings, including last week’s military parade marking the closing stages of North Korea’s key party congress. Pyongyang’s official Korean Central News Agency (KCNA) released a photo of Ju-ae shooting a rifle at an outdoor shooting range, peering through a rifle scope
India and Canada yesterday reached a string of agreements, including on critical mineral cooperation and a “landmark” uranium supply deal for nuclear power, the countries’ leaders said in New Delhi. The pacts, which also covered technology and promoting the use of renewable energy, were announced after Indian Prime Minister Narendra Modi and Canadian Prime Minister Mark Carney hailed a fresh start in the relationship between their nations. “Our ties have seen a new energy, mutual trust and positivity,” Modi said. Carney’s visit is a key step forward in ties that effectively collapsed in 2023 after Ottawa accused New Delhi
Gaza is rapidly running out of its limited fuel supply and stocks of food staples might become tight, officials said, after Israel blocked the entry of fuel and goods into the war-shattered territory, citing fighting with Iran. The Israeli military closed all Gaza border crossings on Saturday after announcing airstrikes on Iran carried out jointly with the US. Israeli authorities late on Monday night said that they would reopen the Kerem Shalom crossing from Israel to Gaza yesterday, for “gradual entry of humanitarian aid” into the strip, without saying how much. Israeli authorities previously said the crossings could not be operated safely during
RSS