Tishwash: from Iraqi’s news
With the rise of the Chinese yuan… are the world’s economies moving towards adopting a three-currency reserve system?
An increasing number of countries in the world are showing greater openness in their trade exchanges to the euro, the Chinese yuan and even a basket of currencies, along with the “strong dollar” that has dominated global trade since the end of World War II, in an effort that seems closer to adopting a triple reserve system. Currency targets among other things diversification of risk.
China, the world’s second largest economy, is leading this “openness” in a relentless effort to expand the base for using the yuan in its foreign payments, something that peaked last March when its share of cross-border payments and receipts jumped for the first time to a record high of 48% from zero. Almost in 2010, the share of the dollar fell to 47% from 83% during the same period.
And while Beijing completed, at the end of last March, the first transaction to buy liquefied natural gas in yuan, which included about 65,000 tons, in a deal that put the dollar under pressure and was considered the first of the largest gas importer deals in the world to be settled in its local currency, China tended before that to establish offshore yuan centers in both Hong Kong, London and Singapore, which allowed foreign companies to hold and trade in yuan-denominated assets.
As for Brazil, the largest economy in Latin America, it also made a decision on March 29 to deal in the yuan in its trade with China, which amounts to about $150 billion annually, a step that came after a series of events that all fall under the category of abandoning the dollar in global trade.
For its part, Russia did not fear, whether on its own or within the BRICS group, which includes China, India and South Africa, that it would take more enthusiastic measures in this regard to end the dollar’s hegemony, especially after the extensive sanctions imposed on it in the aftermath of the war on Ukraine in February of last year, so I announced the summer of 2022, supporting the use of the yuan in calculations between Moscow and the countries of Asia, Africa and Latin America, by preparing to create an international “reserve currency” based on a basket of currencies of the “BRICS” countries that account for about 23% of the world’s economy.
Which I confirmed again last January, by intending to discuss the group’s initiative to establish a unified currency among the member states, during its summit scheduled for next August.
As for the Association of Southeast Asian Nations (ASEAN), which includes 10 countries from emerging economies, it is considered the third largest economy in Asia, and the fifth in the world after the United States, China, Japan and Germany. It is also looking to reduce dependence on the dollar in trade exchanges, and tends to deal in national currencies. among them.
All of these factors led to many declines of the dollar in dominating the global financial market, as it fell from 80% in the global monetary reserve twenty years ago, to 59% now, a decline that has not yet found anyone to fill its void, despite the rise in the rate of the Chinese yuan. However, it did not equal the 15 percent of Chinese output in the global economy, compared to 21 percent for the US economy.
Commenting on all these developments, financial analyst Ramzi Qasimia said, in an interview with Qatar News Agency (QNA), “It seems that the world’s economies are moving towards adopting a three-currency reserve system that includes the dollar, the euro and the Chinese yuan, with the erosion of the dollar’s share in global reserves for the yuan’s account.”
In this regard, he pointed out that some global central banks have taken important steps towards diversifying their reserves of foreign currencies and not being limited to the dollar, which has recently been done by major economies such as Russia, China, India, South Africa and Brazil, with the tendency of some of those countries to turn to gold as an essential and major part of those reserves. Where gold allows central banks to diversify their assets away from the risks of the dollar and US bonds.
Qasimia added, “It is also noted in this direction that the Chinese Central Bank was the largest buyer of gold in the world during the past five years, and therefore it can be said that the Chinese yuan derives its strength from the surplus of China’s trade balance with most countries of the world, in addition to the large reserves of gold.”
And the financial analyst added that the Russian-Ukrainian war and the resulting freeze by the United States of about $300 billion in Russian foreign reserves led to other countries fearing that the dollar would be used as a pressure card on them, “so we find that many countries resorted to increasing their dealings in yuan, for example.” Iraq recently announced the acceptance of the yuan as a settlement currency for commercial operations with China, and the Central Bank of Egypt also announced the introduction of the yuan and the ruble in foreign trade transactions.
He stated that the internationalization of the yuan, which accelerated recently with the increase in the volume of trade exchange between Russia and China and the search of several countries for an alternative payment currency to diversify risks, made the countries of the world view it as a reliable currency as a result of the search for an “additional currency” and not an “alternative” in global financial transactions.
For his part, economic and financial expert Abdullah Saleh Al-Raisi said, in a special statement to QNA, that some countries of the world have begun to look seriously and deeply to find alternatives to the dollar in order to achieve their economic goals, and he considered this a natural result of the dollar’s monopoly for many years in global trade operations, especially dealing in foreign exchange. Oil and gas buying and selling operations.
Al-Raisi restored the strength of the dollar in addition to the strength of the United States economy, noting that it is the main currency in trading for the sale and purchase of oil and gas, stressing that the existence of an “alternative currency” for trading in oil and gas will be a severe blow to its strength, and will result in correcting the great imbalance that remained in favor of the American currency. Most of the periods of the current decade, as it is likely that capital will return to flow to other countries after its massive return to the American market during the period of increasing interest rates and the strength of the green currency.
For her part, Dr. Layal Mansour, an expert in monetary policy, said in a similar statement to Qatar News Agency (QNA) that it is impossible for any competing or alternative currency to exist for the dollar in the foreseeable future, due to its strength and the greatness of the US economy and its stability in various aspects.
The expert in monetary policy said, “With the strength of the United States economically, security, politically, and geopolitically, Washington will not allow the existence of an alternative currency and competition for the US dollar,” ruling out that countries with a currency that is 100 percent unliberated and supported by the Central Bank, and do not have the transparency, accountability, or democracy that they possess, can The United States of America, creating an alternative and competing currency for the dollar, “everything that is said about replacing the dollar is nothing but an indirect pressure card on America.” link