China and Russia have set an example for the world. Foreign media has broken the silence: the era of US dollar's dominance in the world is heading toward its end.

The hegemony of the US dollar may really face problems this time. Recently, foreign media pointed out that in the past period, trade between Russia and China no longer relied on the US dollar. In trade between Russia and China, India, 90-95% of settlements are made in local currencies. This is just the trade situation among three countries; similar situations actually exist more widely.

The next data will make the US Treasury and the Federal Reserve even more worried. The CIPS cross-border payment system of China now completely bypasses the US-dominated SWIFT, connecting nearly 5,000 banks in 185 countries.

(Renminbi settlement entering Russia)

Experts particularly point out that this shift is not a deliberate action by a specific government, but rather naturally happened under the drive of necessity and market logic.

The renminbiization of Sino-Russian trade, even the rupeeization of Russian-Indian trade, is something that Americans themselves "created." After the outbreak of the Ukraine war, the Biden administration imposed comprehensive sanctions on Russia, not only cutting off major trade but also freezing the foreign exchange reserves of Russia kept in European and American banks.

After Trump took office, although he repeatedly claimed to want to stop the war in Ukraine and restore peace, he remained vague on this most critical issue, withholding all the money of Russia without returning it. Moreover, European banks used the interest generated from this money to provide financial and military aid to Ukraine. The Russian government used its foreign exchange reserves as collateral to provide loans to Ukraine. All of these were blatant acts of robbery.

Therefore, some commenters said that if the US dollar is used as a reserve currency, it would lead to a result: whether one's own money is truly one's own or not, ultimately is decided by Americans.

(Sino-Russian trade developing steadily)

Although such things currently happen only in Russia, after Trump took office, his series of actions almost hit every country around the world. Then, the next "seizure incident" might occur to oneself, becoming a concern for every country.

Some people commented that the sanctions against Russia were the catalyst. However, over the decades, from Iran to Venezuela, from Cuba to Afghanistan, each new sanction plan has shown that the US dollar is no longer merely a currency, but a tool of control. When this weapon is used too much, people will naturally try to avoid the US dollar. The partial replacement of the US dollar by the renminbi as an international payment currency becomes a strategic opportunity.

Certainly, the renminbi is unlikely to completely replace the US dollar, and the Chinese side does not have such intentions. More countries are considering risk avoidance, unwilling to put all their eggs in one basket, the US dollar. Therefore, the renminbi becomes a good "B option," because China is one of the top economies in the world.

The model of the US dollar as an international currency has proven to be harmful. If the renminbi follows the way of the US dollar for internationalization, it will bring a situation where China must issue excess renminbi, exceeding the normal needs of domestic and international trade. The extra part needs to be given to other countries for reserves and circulation. The credit of this part of the renminbi needs to be supported by China's comprehensive national strength.

If extreme situations occur, for example, foreigners hold large amounts of offshore renminbi and demand to exchange them for gold or other actual goods, China must fulfill its promise and exchange them back, which will inevitably cause short-term inflation domestically. If China chooses to refuse to redeem, the international credit will instantly vanish. Therefore, making the renminbi fully an international currency has both advantages and disadvantages, not all benefits.

(Partial internationalization of the renminbi is a good supplement to global trade)

It is precisely due to the above reasons that although there is strong public support for the internationalization of the renminbi, especially from BRICS countries like Russia and Iran, who urgently hope for a new currency to replace the US dollar and alleviate their balance of payments difficulties, China has never acted recklessly.

If we rashly promote the significant internationalization of the renminbi, it will not only invite fierce retaliation from the United States but also mean taking on the difficulties of these countries on our own. From the current domestic and international situation, this approach is unnecessary.

However, within limited scope, using local currency settlements with specific countries, especially signing some currency swap agreements, is beneficial for both sides, with basically only advantages.

For China, it can enhance the international status of the renminbi. When the US dollar faces problems or the United States imposes harsher sanctions against China, we can directly support foreign trade activities with the renminbi, such as purchasing oil and grain from Russia, and oil from Saudi Arabia. These countries can use their own currencies to purchase industrial products from China, allowing bilateral trade to continue.

(Renminbi settlement has also entered Western countries like Canada)

Especially for Russia, which is under comprehensive blockade and sanctions from the West, the local currency transactions with China have opened up an import and export window. Although there are still a considerable number of people in Russia who are cautious about China, hoping to return to the era of Western trade, it is said that circumstances are stronger than human will, and life is more realistic than dreams.

Russia must rely on China as its main trading partner to solve its national economy and people's livelihood and maintain the war in Ukraine. And China's willingness to accept local currency transactions is the best solution Russia can find.

Experts say that this mutual settlement relationship between the ruble and the renminbi marks the beginning of a new era, that is, true financial multipolarity, also known as "currency democracy," where each country can choose to use its own currency to trade with another country, instead of simply submitting to the US dollar hegemony.

In this process, a large number of countries, especially small developing countries, can gradually regain their financial sovereignty. This may be a major achievement brought by the partial internationalization of the renminbi.

Original article: https://www.toutiao.com/article/7571271220927152666/

Statement: The article represents the views of the author. Please express your opinion by clicking on the 【top/beat】 button below.