Protecting China’s national wealth and avoiding potential Western
sanctions will be at the top of Beijing’s national security agenda
following the West’s financial sanctions against Moscow. The lesson for
Beijing is that if the US and its allies act in unison, it does not
matter whether assets are held in US dollars or in other Western
currencies as they're subject to possible seizure.
As recently as
last August, ex-US president Donald Trump called for all countries to
“collectively cancel any debt they owe to China as a down payment on
COVID reparations”. Although President Biden has rejected the idea, it's
clear that seizing Chinese wealth has been on the minds of many US
politicians, and possibly, of some policymakers. As at end-Jan 2022,
China holds USD1,060.1 billions in US Treasury Securities.
China
clearly needs to diversify its reserves away from the US dollar and the
euro. However, China cannot convert all its stock of US$3.2 trillion
in forex reserves into gold as the total value of above-ground gold is
around US$12.5 trillion, with about half in the form of jewellery. That
leaves US$6.7 trillion of gold held as a financial asset, of which
US$2.1 trillion is owned by central banks and unlikely to be for sale.
Remaining US$4.6 trillion is too small to absorb a sizeable chunk of
China’s US$3.2 trillion of non-gold reserves.
A way to insulate
Chinese assets from potential Western sanctions is to redeploy them away
from Western financial system and into tangible investments in
countries that are geopolitically neutral and/or pro-Beijing, such as
President Xi’s Belt and Road Initiative. China’s gross outward direct
investment escalated to US$1.6 trillion between 2014 and 2020, without
which, China’s holdings of US dollar reserves would have continued to
rise. But it's impossible for China to hold most of its overseas assets
in the form of investment in tangible assets outside the Western
financial system.
If the Chinese currency yuan were a global
reserve currency, the vulnerability of Chinese assets would be greatly
reduced. Therefore, the Chinese central bank must ensure the use of the
yuan in all foreign trade settlements.
Anonymous
4 comments:
Going, going and gone:
'There will be a lot of interruptions, even starvation, a lot of property transfers and disruption, but over the long term, the United States is destroying the idea of a single interconnected globalized order because it’s separated Europe and North America from the whole rest of the world.'
And pink dot will be in deep sh**:
https://www.unz.com/mhudson/nato-russia-proxy-war-revealing-signs-of-a-fading-america/
The US$ Hegemony is the 'Achilles Heel" of the USA superpower backbone. Destroying it will bring down the whole house of cards built upon the foundation of money from thin air. It will not be easy, as it involves the collapse of the Devil's Evil Empire.
No one initially wanted to go against the status quo, but the weaponisation of the US$ was actually the tipping point. It awakens the whole world to the realisation that this was not the way it should be. Saddam Hussein tried to upset the apple cart and had to be put to death. So was Gaddafi. They had neither the military backing nor financial backbone to withstand the Devil's evil hand. They did the right thing, but at the wrong time.
The world then knew that going forward they will be threatened to no end, and Russia and China together put their plan to do the impossible. Both countries are not Iraq or Libya that can be easily defanged or cowed. They persisted, discreetly, of course, building up their deterrents, ensure their co-operation to cover all angles. The rest is still evolving, countries are joining the train moving out of the US$ Hegemonic hold on them.
We thought Ukraine was just a regional conflict, but it now has ignited and caused more damage to the USA and the West and exposed their reckless behavior and miscalculated steps.
The harm caused by the war in Ukraine and the sanction against Russia are more damaging to the Europeans than to Russia.
As this drags on, the Europeans would raise the white flag one by one. Forget about the Ukrainians as they volunteered to be the sacrificial, to be destroyed. But the Europeans were dragged and forced into it against their national interests. And their economies would be ruined if this drags on for another few months. Most of them are nearly bankrupt and heavily dependent on trade with the Russians.
Russia could carry on business as usual with China and India and the Arab countries providing all the support it needs.
The Americans would bring down the whole of Europe very soon. The Europeans are going to cry for help, gasping for air.
New World Currency Order is Coming
A new financial order will be negotiated in the world, and the West won’t have the main say in it anymore as the “hellish” sanctions imposed on Russia by the US, EU, and their allies over the conflict in Ukraine have failed to cripple the country, but are instead “returning to the West like a boomerang,” ex-Russian President Dmitry Medvedev said.
While the West continues its “fruitless efforts” to restrict Russia, “the world is gradually moving towards a new logic of global economic relations; towards upgrading the financial system,” he said.
The US and EU have “tarnished their reputation” by blocking the reserves of the Russian central bank. “It is impossible to trust those who freeze the accounts of other states; steal other people’s business assets and personal possessions, compromising the principles of sanctity of private property,” Medvedev said .
A targeted demonetisation of the world’s most globalised currencies has big implications. The weaponisation of those currencies and of the financial systems that handle them undermines those properties for any holder who fears being targeted. Sanctions on Russia’s central bank are a shock. Who, governments ask, is next? What does it mean for our sovereignty?
Confidence in reserve currencies is now “fading like the morning mist,” and the prospect of abandoning the dollar and euro in this role does not seem like such an unrealistic prospect anymore, Medvedev said. “The era of regional currencies is coming.”
Russia said that from March 31, it will only accept payments for gas in rubles from “unfriendly countries,” which include the US and EU, while China and Saudi Arabia have been discussing switching to the yuan in their oil trade.
Meanwhile, the German government has taken the first formal step towards gas rationing as it braces itself for a potential halt in deliveries from Russia because as the West refuses to comply with Moscow’s demand for gas imports in rubles.
Russian officials said on Tuesday that Moscow would not “supply gas for free” to Europe, a day after G7 countries unanimously rejected President Vladimir Putin’s directive requiring ruble payments.
Kremlin spokesman Dmitry Peskov said the country should consider selling a wider range of exports in rubles, such as grain, fertilisers, metals, wood and oil. "There are many countries that are showing an interest in mutual settlements in national currencies,” he said.
The world is now rushing to find ways of transacting and storing value that circumvent the currencies and financial markets of the US and its allies.
A recent pamphlet by Harvard’s Graham Allison and colleagues on The Great Economic Rivalry concludes that China is already a formidable peer competitor of the US. History suggests that the currency of an economy of its size, sophistication and integration would become a global money.
Also in Digital Currencies, a pamphlet from the Hoover Institution, it states that a credible alternative to the dollar system is China’s Cross-Border Interbank Payment System (Cips — an alternative to the Swift system) and digital currency (the e-CNY). Both might become a dominant payment system and vehicle currency, respectively, for trade between China and its many trading partners. In the long run, the e-CNY might also become a significant reserve currency. Moreover, argues the pamphlet, that would give the Chinese state detailed knowledge of the transactions of every entity within its system. That would be an additional source of power.
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