Last I checked USD is still the reserve currency. You can cry and moan about it all you want but that's still a fact as of 2024. Stop living in the future.
Chinese Economics Thread
- Thread starter Norfolk
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Last I checked USD is still the reserve currency. You can cry and moan about it all you want but that's still a fact as of 2024. Stop living in the future.
It is indeed.
But at the same time, dedollarisation is very much ongoing, so for how long that is gonna be true?
Well, imo it will lose that status within a decade.
As you see, they are not that important, the Chinese market is huge on its own. The majority of Chinese EV cars will be sold domestically for example. The same is generally true for all the renewable tech.
Those EU brands are made in China, but profits are in their hands, and those large shareholder oligarchs control governments in the West. So they won't risk those profits to start a trade war in autos.
Not to mention how without Chinese batteries and other types of technological and R&D help EU will find it hard to produce their own EV models. I predict that nothing will help and Chinese EVs will win.
Nobody knows how long, but it isn't today, so any orientation/framing of the Chinese economy through the lens of an *immediate collapse* of the USD is just beyond farfetched.
True.
Although, we're basically staring at the FED being very likely to lower rates here in 2024 (within next 6 months) and likely to very low levels.
And by then, USD is basically gonna flood the market, and the FED is gonna need to buy US bonds (or else, how is the 2-3 trillion deficit gonna be funded, along with turnover of new bonds replacing old), so basically, another big round of QE.
Which is also gonna lower Dollar Index by a lot (so the exchange rate of dollar to other currencies, will have the other currencies strengthen against the dollar).
And well, that's basically gonna strengthen the resolve of other countries to get rid of the dollar/dedollarisation, so yea, I don't see how the dollar reserve currency status is gonna last beyond 10 years (it might still take up say 30%ish of total global trade by 2030s, but that very much isn't 'reserve currency status').
The scenario you paint is one of *many* possible scenarios - We don't even know how 2024 will pan out let alone 2034. If it was that easy to predict macroeconomics everyone would be successful doing it.
But one thing I want to make clear is that one of the core tenets of a reserve currency (or any currency, in the sense of legal tender) is a strong sense of confidence in the purchasing power of said currency. In this sense, over the past 2 years, the RMB declined vs the USD even as the US lost purchasing power through inflation - so this confidence is not yet at a satisfactory level.
While we can sit here and shit on foreign media for their deservedly shitty takes on the Chinese economy, ultimately if RMB is to become an internationalized currency it *needs* the confidence not only from patriotic ethnic Chinese people on SDF (a *tiny* minority), but more importantly those across the world - most importantly those with money - and as of today, the global south does not matter because they are not wealthy. And more importantly, the foreign media still commands way more capacity to 'call the shots' so to speak even if they are shit. (Just like how your boss might be an idiot but they still call the shots)
Finally, just because the USD dies doesn't necessarily means RMB takes over - we can go back to some sort of physical commodity backed currency (gold? oil? solar panels?) - who knows.
It's basically 100% gonna happen, but we can come back in a year to see if I was correct or not.
Also, I don't think China/Chinese government want the RMB to be the next international reserve currency.
More like, it would be a 'big' currency, taking up some around 25-30%ish of total trade, which would more accurately reflect how much the Chinese economy actually takes up of the world economy (when looking at ppp).
The point has nothing to do with the USD being the reserve currency.
The point is China has not attacked this market issue with any of the same urgency that you are trying to convince us that China is supposedly doing.
If the US could do QE to $12T in 2008 USDs then surely China can do at least $1T in today's USD if the crisis warrants it.
It wants to contain the drops but is no way hitting it with same force that the US did with Lehman. It is not an existential problem worth adding a significant amount of debt + moral hazard.
manqiangrexue
Brigadier
I agree with your take; no one can predict economic trends 10 years down the line, especially in a tumultuous global situation like today. The downfall of the USD as the global reserve currency is China's most difficult and uncertain fight, one that is more challenging than any trade, tech, or possibly even hot war. China still has paths to surpass American power without winning this fight, but if it does win, it paves a very smooth road to victory. This point you raise is especially important as I don't think that Beijing even wants to make the RMB the global reserve because China's economy isn't import-oriented and it doesn't want to flood the world with its money. For China, it would just be best if things were fair and there was no global reserve currency.
To me, it's clear that the strongest pillar of American power is its control and power over global finance and that is afforded by be the reserve status of the USD. If that were to crumble or degrade, even without an ascent of the global RMB, America's economy and the rest of its powers would be in dire straits. Its ability to "harvest" other countries and export its financial problems essentially sacrificing allies to save itself from its own mistakes, would be crippled and it'd be a cat on its last life. And this is not a careful or well-coordinated cat; it's a clumsy big cat that makes mistakes and dies all the time; it's the regenerative ability that makes it so strong.
From SWIFT and CIPS data combined, RMB still makes up some 20-30% of the global currency exchanges. It is not the clearly dominant reserve currency but nevertheless significantly dominant.
At its economic size, China easily has the ability to push out ~$10T if they wanted.
The stock market has never been a signficant part of the Chinese economy and this is obvious if you look at what share proportionally it occupies. Is this the last line of cope for Americans to claim they still have a chance of catching up economically? Stop living in an alternate reality.