This year's special feature "Diagnosis 2026: China's Economy" by The Paper will focus on various opportunities and challenges in the first year of the 14th Five-Year Plan. The second article in this series features Professor Zhang Chun from the Advanced Institute of Finance at Shanghai Jiao Tong University, who shares his insightful views with us. Professor Zhang has long focused on the offshore RMB financial system and is a financial scholar in this field with an international perspective and continuous exploration of the Chinese path.
When discussing the topic of RMB internationalization, Zhang Chun mentioned that many people say "the dollar is about to collapse, and the RMB will replace the dollar as the dollar replaced the pound," but he personally believes this view may be overly optimistic and irrational.
Zhang Chun said that although the United States faces many problems, the issues in China's economy also need attention. This is why China slowed down RMB internationalization in recent years and now only promotes it in the offshore market. Currently, the onshore RMB market still faces many problems, such as an imperfect financial system.
"China still needs a long time to catch up with the US in terms of currency, possibly at least thirty to fifty years. Even fifty years later - assuming that money still exists then - the RMB may not necessarily have to replace the US dollar. Another important point is that the RMB even does not want to replace the US dollar," Zhang Chun said.
He explained that after the dollar replaced the pound, there was a period when it was very strong, but many problems that followed in the US were caused by the dollar being too strong. "Why did the US experience industrial hollowing out? Because the dollar was too strong. The dollar was overvalued, making it difficult for industries to make profits in the US, so they moved to cheaper places to manufacture, which was the initial cause of industrial hollowing out."
"If the dollar rapidly declined, China should not take the lead, nor should it seek dominance in currency. Because this would encounter the same problem as the US: the currency being greatly overvalued. If others buy RMB, Chinese export enterprises might lose their competitiveness. I think, even if China has the ability, it would not want to achieve such a goal. In fact, China may prefer the RMB and the US dollar to share the costs."
Zhang Chun added that while currency hegemony brings great benefits, it also incurs significant costs, eventually leading to the same problems that the US is facing today. "Therefore, I believe China does not want to and should not take the path of currency hegemony. We prioritize the real economy, and currency hegemony has a negative impact on the development of the real economy."
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Original: toutiao.com/article/7600768211302351401/
Statement: This article represents the personal views of the author.