"... It can probably force Iran into taking RMB for their oil if they really pushed. ...".
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Chinese Economics Thread
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Most of Iran's and North Korea's trade is secret anyway so official statistics aren't very meaningful. The whole sanctions evasion scheme will make it very hard to track how much has been sold and for how much. Myanmar might become a similar case. Maybe with Russia's help it will become easier to push RMB sales to other nations that aren't sanctioned
In the first place China does not want to have global reserve currency status right now.
If they wanted it, presumably in the duration of a few years they can pressure most major resource holders to deal exclusively in RMB while attacking the dollar using their own reserves and the reserves of allies, and there's not that much US can do aside from trying to attack someone, somewhere, but because of the ongoing war, its doubtful the resources exist.
The problem is that if RMB is the global reserve, China must be constantly exporting RMB, in other words, it will lose its edge in exporting goods, which in turn will cause a drop in competitiveness.
There is nothing(little) that China wants from the world that would justify giving up on China's own industrial engine. And there are many markets that are still ripe for China to leverage their well educated and innovative population into dominating. All this would be impossible with a RMB global reserve.
This is why you see China investing in digital currencies and other such things, all to avoid actually using the RMB.
China is creating RMB for resources deals in order to keep its resource import efficient and to enjoy a currency privilege there, but it would (at least before becoming a high/very high income country) not want to make everyone use RMB.
If they wanted it, presumably in the duration of a few years they can pressure most major resource holders to deal exclusively in RMB while attacking the dollar using their own reserves and the reserves of allies, and there's not that much US can do aside from trying to attack someone, somewhere, but because of the ongoing war, its doubtful the resources exist.
The problem is that if RMB is the global reserve, China must be constantly exporting RMB, in other words, it will lose its edge in exporting goods, which in turn will cause a drop in competitiveness.
There is nothing(little) that China wants from the world that would justify giving up on China's own industrial engine. And there are many markets that are still ripe for China to leverage their well educated and innovative population into dominating. All this would be impossible with a RMB global reserve.
This is why you see China investing in digital currencies and other such things, all to avoid actually using the RMB.
China is creating RMB for resources deals in order to keep its resource import efficient and to enjoy a currency privilege there, but it would (at least before becoming a high/very high income country) not want to make everyone use RMB.
China does not need to have the reserve currency. But it needs to avoid the dollar as soon as possible.
After what the US did to Russia, it is necessary to keep reserves in gold or in a basket of currencies with mechanisms of trust, otherwise the US will continue to dominate the world with impunity and China will not be able to do anything.
After what the US did to Russia, it is necessary to keep reserves in gold or in a basket of currencies with mechanisms of trust, otherwise the US will continue to dominate the world with impunity and China will not be able to do anything.
The dollar is the greatest and last power of the US.
If half the world ceases to have the dollar as its reserve currency, the dollar becomes a Turkish lira without economic reforms and budget cuts that still ensure the US as the largest economy and immigration destination.
Expensive suburbs and subsidies for cars, chips and the military complex also become unsustainable.
Cut the blackmail power of the dollar and the US loses hegemony.
If half the world ceases to have the dollar as its reserve currency, the dollar becomes a Turkish lira without economic reforms and budget cuts that still ensure the US as the largest economy and immigration destination.
Expensive suburbs and subsidies for cars, chips and the military complex also become unsustainable.
Cut the blackmail power of the dollar and the US loses hegemony.
Yes, Myanmar news came out early this year. But they are a small fish. The bigger news is that ASEAN countries as a whole are adopting great Yuan usage in bilateral trading.
This is pretty big for internationalization of Yuan. It looks like they are still uncomfortable with direct investment into Shanghai stock exchange, but a lot of western firms are connected to HKEX and HKSE. So all of these measures now allow wider trading of off shore RMB and investing in Chinese stocks and such through this connect.
These things need to continue to be expanded so that other countries are willing to use Yuan more frequently.
keep in mind that they are also trying to slowly open up market of yuan denominated bonds to oversea investors.
Again, these are needed. You need ETFs that are backed by government bonds. All these things are needed for Yuan to become more international. They talked about China's reaction to outflow of money. Well, we've had several months of that and the offshore Yuan basically behaved like a deliverable currency. China had to defend it with treasury bond sales. And now that Chinese economy will be opening back up, Yuan has recovered in value. Longer term, China cannot expect other countries to use RMB unless they open up their financial system over time.
Again, these are needed. You need ETFs that are backed by government bonds. All these things are needed for Yuan to become more international. They talked about China's reaction to outflow of money. Well, we've had several months of that and the offshore Yuan basically behaved like a deliverable currency. China had to defend it with treasury bond sales. And now that Chinese economy will be opening back up, Yuan has recovered in value. Longer term, China cannot expect other countries to use RMB unless they open up their financial system over time.
The thing is what will America do?
Russia is a country with UK like economy. If China today wanted to seize all UK international assets within reasonable reach, it could do so. It would cause an uproar and many countries wouldn't approve, but it'd be no different than what happened between US and Russia.
China on the other hand is the world's largest economy. Dollars have value largely because China is ok with dealing using them.
Much of China's dollars are stored in itself or allied countries. Even if some stooge in the white house says these dollars are invalid, these dollars still exist and can be used.
Another is the issue of debt. US has massive amounts of assets in China. If US defaults using war as an excuse, China can just seize their assets. If China needs to extract a pound of flesh from America to pay back the debt, the stuff is already there, inside the mainland, on HK, Taiwan, wherever, ripe for the taking.
The paradox of reserve currency is that the current arrangement lets America borrow China's geopolitical power. But at the same time, China needs to develop the export goods market to improve the nation.
I'm no economist but the way I see it, the ideal situation for China is to avoid contesting dollar reserve currency but get a yuan resource monopoly. Then when Chinese brands comprehensively dominate most of the global market and only after US has been guided to a soft landing like how Gorby landed the USSR, then discussions about a shared Yuan and dollar global reserve will be made, after Chinese companies picked up the scraps of what's left from US former national champions using devalued dollars.
