Ah that's disappointing. Some on Twitter and pepe Escobar were pretty hyped up on this photo, I thought it was taken during this meeting too. So turned out it was from 4 years ago.
Shanghai Cooperation Organisation (SCO) and Global South strategic cooperation
- Thread starter Strangelove
- Start date
14th China-ASEAN summit. Looks like the new ports they've built as part of BRI in Guangxi is getting promoted. Interesting that Nanning is promoted as a financial gateway to ASEAN countries
aside from that, report on RMB usage for 2022 was released.
according to this
RMB usage has gone up 20 times in the past decade.
last year, the trade volume between China and ASEAN countries hit $878 billion.
Looks like we are going to blow past that this year, since the first 2/3 of this year already reached $626 billion.
Now, it says that the cross border settlement in Yuan reached $685 billion in 2021 and that the CIPS transactions reached 3.3 trillion Yuan. Both figures are a lot higher than I thought. Not sure if that's accurate.
As discussed here, China has been working on pushing RMB and CIPS for a few years. Recently, transaction volume reached $55 billion a day. That's a good first step.
Aside from this, deals continue to be made. Over 10 billion RMB deals were signed.
aside from that, report on RMB usage for 2022 was released.
according to this
RMB usage has gone up 20 times in the past decade.
last year, the trade volume between China and ASEAN countries hit $878 billion.
Looks like we are going to blow past that this year, since the first 2/3 of this year already reached $626 billion.
Now, it says that the cross border settlement in Yuan reached $685 billion in 2021 and that the CIPS transactions reached 3.3 trillion Yuan. Both figures are a lot higher than I thought. Not sure if that's accurate.
As discussed here, China has been working on pushing RMB and CIPS for a few years. Recently, transaction volume reached $55 billion a day. That's a good first step.
Aside from this, deals continue to be made. Over 10 billion RMB deals were signed.
From what I learned from my parents, the college (now university) where we lived on specialized in teaching languages of the ASEAN countries even since the 1980s, this plan to build this hub should have been decided on in the 1990s.
In short, they want but they can't (in the near term).
The internal trade among the SCO countries are not as great as you may think. Take Kazakhstan for example. Data source here
Its exports to other SCO countries plus Belarus is 26.31% of its total export in 2017. Surprisingly Italy is its number one market. This means that 73.39% of its export will be paid by USD or EURO, not RMB or Ruble. By now this figure may have changed but don't expect much turned around. The only way to increase RMB or Ruble usage is to do more internal trade than with external, in another word a more integrated and bigger common market. This kind of change takes years or decades. I guess it will be 5 to 10 years.
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Think about the trade volume between China and ASEAN, then think about how much dollar will be squeezed out and flooded back to US and the rest of the world.
I'm thinking about mostly energy/natural resources trades. Those are ones where it makes the most sense for China to try to pay SCO countries in CNY.
I'm not sure what your point here is. Sorry. If USD is not used in transactions, then they just stay in the banking system or the fed. They don't need to flood back to US. Technically, USD is constantly getting created out of the thin air by banks. If they are not need, they just don't get created.
I thought these trade with China are already in RMB or in the process of transitioning to RMB. Just not being publicized in SCO event.
It doesn't matter where they stay, over supplied currency always devaluate. These squeezed out dollars are not property of Fed. Fed has to buy them to keep dollar value, either Fed sell gold which they don't have, or Fed need to borrow which increase debt. So either dollar devaluate if Fed do nothing and got inflation in US, or Fed borrow to keep dollar up but get deeply indebted which has the same effect of inflation in killing the economy.
They don't have to, but there will be more USDs in the world market than it need to be compared to available products. That will devaluate USD which will decrease US' purchasing power for import. That is the same effect as if they flood back to US to decrease American's domestic purchasing power. Actually this is how US has been exporting its own economy trouble by printing. Currency is like water, it flows to wherever it can. The only thing US can do is what China (and USSR) did in the past and still doing, stop USD being freely exchangeable. That will just kill USD in a different manner.
This was not a problem when everyone accepted or forced to accept USD for trade. But when both Chinese and ASEAN decide to abandon USD, those thin-air dollars created in the past decades that are already circulating will become useless. Stop printing today won't help what has already been done.
In a way, USD's acceptance as a word trading currency is a double-edged sword. US does not have full control of it.
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Got it. Thanks. I wasn't sure they were. I mean only recently did the Russians agree with China to use RUB/CNY for gas trades. So, I'm under the impression that Central Asian countries are further away.
I don't really look at things that way. If someone in Malaysia needs to buy something from China in USD, then it needs to keep a healthy stash of USD by trading with either Malaysian bank who then buys it from a FX dealer that buys/sell USD. If there is equal amount of buying/selling of USD, then all the USD that got "created" also gets destroyed. I work at a company that does a lot of FX trades. Money gets "created" all the time. You typically don't have the currency that you are selling. Your broker is just busy netting the trades and looking to take on as small of a position as possible. The actual currency position they hold is a tiny fraction of the trade that goes through their system everyday.
Not using USD simply takes away all this middle men and saves a lot of the cost along the way. And it always takes away US banking system's ability to stop your transaction.
We can keep the different ways of looking at things. I just want to make sure that you understand what I am talking about, so here comes some more.
That USD between Malaysia and China is the one going to be replaced by RMB when the two countries are expanding RMB and Ringgit usage in bilateral trade. These RMB and Ringgit were not issued and circulating. Those dollars are the squeezed dollars that I was talking about. Since China and ASEAN are number 1 trading partners of each other, the dollar to be replaced is huge. Only trade involving other countries will remain priced in USD.
For trade of fixed amount of goods, there is a fixed amount of currency in circulation. Since dollar is used (printed supplied by Fed) in place of RMB and Ringgit (for example) in trade between China and Malaysia, if the two decides to print more RMB and Ringgit to serve that portion of their trade, they can. The problem would be that there is surplus USD already printed for the same purpose.
I am not sure about how currency and economy are taught in the west, I am only educated in China by the Marxist analysis. In that theory, currency should not be over-issued, if it does, currency will devaluate, no amount of monetary policy can change that. In the scenario that we are discussing, one can say USD was overprinted or RMB is to be overprinted, the outcome is the same, money is overprinted, just different color. It is only matter of which currency is accepted as the new medium for trade and the share of them.
In a country, the central bank will balance its money issuing and the goods in circulation. But in world market, PBC won't care about the "over-supply" of RMB replacing USD would have negative impact on USD just like Fed didn't care, because these Banks motivation is political. The can be perfectly explained by the saying "Dollar is my money but your problem", just replace Dollar with RMB.
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