How China’s Digital Currency Will Thwart US Dollar Trap And Help The World

The digital renminbi is a sovereign currency fully backed by the state, does not require a bank account and has full oversight by Chinese banking authorities.

Developing countries will embrace the convenience of China’s digital payment systems, which have great poverty-relief potential for the world’s unbanked poor.

The US dollar displaced the British pound as the world’s leading reserve currency at the beginning of the last century. Since the Bretton Woods Agreement in 1944 linked world currencies to the dollar, it has reigned supreme.
As China opened up and became integrated with the world trading and financial systems, it has been caught in a “dollar trap”, having to convert excess national savings into secure, internationally-convertible US treasuries.
Over the years, the US has enjoyed the dollar’s exorbitant privilege of almost unlimited money-printing, or “quantitative easing” in central bank parlance. As former US president Richard Nixon’s Treasury secretary John Connally famously said, “The dollar is our currency, but it’s your problem.”
Arvind Subramanian, senior fellow at the Peterson Institute for International Economics, pointed out in 2011 that the world was living in the shadow of China’s economic dominance. More national currencies were moving in tandem with the renminbi instead of the dollar. Nevertheless, the dollar is being increasingly weaponized to impose economic sanctions on China.
The US dollar has reigned supreme since the Bretton Woods Agreement in 1944 linked world currencies to the dollar. Photo illustration: Reuters
The US dollar has reigned supreme since the Bretton Woods Agreement in 1944 linked world currencies to the dollar. Photo illustration: Reuters
However, owing to America’s dwindling domestic savings and a gaping current account deficit, Stephen Roach has warned that the dollar’s “exorbitant privilege” is about to end.
Now China is pursuing a national digital currency. Unlike a speculative cryptocurrency, the digital renminbi is China’s sovereign currency fully backed by the state. It’s a natural development as China has become by far the world leader in digital payment systems.
Driven by the latest blockchain technology, China’s digital currency does not require a bank account. This has huge poverty-relief potential for the unbanked poor across the globe.
As Chinese banking authorities have full control, the digital currency will help combat illicit financial transactions. The financial data will facilitate the formulation and execution of monetary policies.
As its transactions are instant and transnational, the digital currency would be attractive for international trade settlements with China, including projects in the digital Silk Road of the Belt and Road Initiative.
How to bring financial inclusion to Indonesia’s unbanked masses

The latter faces increasing headwinds from host countries, such as debt unsustainability, ecological neglect, non-transparency, and corruption. China’s authorities are learning fast, though. Working more closely with international organizations such as the World Bank and broader stakeholders in host countries and elsewhere, China is making significant headway with belt and road projects.
What is more, the digital currency does not depend on the US-controlled Society for Worldwide Interbank Financial Telecommunication (Swift) banking system. It is thus immune to dollar-based US sanctions.

According to a July 2019 McKinsey report, China has become more self-sufficient while the rest of the world, particularly Asia and resource-rich countries across the globe, have grown more dependent on China for parts, components, materials, trade, and investment. This supply-chain connectivity is not easy to shift, efforts at decoupling notwithstanding.
While the United States and Western allies are not about to warm to China’s digital currency any time soon, more countries in Asia, Africa, and Latin America are likely to embrace the convenience and opportunities of China’s digital payment systems, made even easier and safer by its sovereign digital currency. This trend is likely to accelerate with the commencement of the Regional Comprehensive Economic Partnership, comprising a third of the world’s population and a third of world GDP.
China’s digital yuan no threat to global monetary systems, ex-PBOC chief says The developing world accounted for 49 percent of world GDP in 2010 and is expected to reach 60 percent by 2030. Thus China’s growing global integration augurs well for the widespread acceptance of its sovereign digital currency, which would speed up the internationalization of the renminbi.
China’s digital sovereign currency will also help drive China’s “dual circulation” economy, accelerating both domestic consumption and international trade and investment.

This video is brought to you by https://bitcoin.ngo

The New Local Bitcoins.

Видео How China’s Digital Currency Will Thwart US Dollar Trap And Help The World канала Dr Karim