US-China Relations Updates

According to Reuters, on April 26th, the Argentine government announced that it will start using renminbi（RMB-yuan）, rather than US dollars, when importing goods from China. The move aims to ease the country’s decreasing dollar reserves.

The report stated that the Argentine government also announced in a statement on that day that the country’s goal is to reach approximately $1 billion in renminbi payments for imports from China in April this year, and approximately $790 million in renminbi payments per month thereafter.

The report mentioned that Argentine Minister of Economy Sergio Massa had previously stated that the decision was aimed at alleviating the outflow of US dollars. At the time of this decision, the country’s dollar reserves were at a “critical level” due to a sharp decline in agricultural exports caused by historic drought and political uncertainty ahead of this year’s election.

The report also mentioned that in November last year, Argentina increased its currency swap quota with China by $5 billion to strengthen Argentina’s international reserves.

In recent times, the “de-dollarization” trend has quietly and suddenly swept across many corners of the world like a spring tide. Whether it’s Latin America, which is regarded as a “backyard” by the United States, or Russia and Iran, which are suppressed by the United States, or energy powerhouses in the Middle East and ASEAN countries that hope to create a model of regional cooperation and development, even European energy giants, they have recently announced plans or taken actions to seek non-US dollar currency in trade settlements. In response, the website “Business Insider” exclaimed that the dominant position of the US dollar in global trade is facing huge challenges. American billionaire Elon Musk also lamented recently that “US foreign policy is too tough, causing countries to want to abandon the US dollar.” According to previous reports by Russian media such as RIA Novosti and Sputnik, former US President Trump also commented on the US dollar on April 14th when he attended the National Rifle Association annual meeting in Indiana. He stated that the US dollar is collapsing and will soon no longer be the “world standard”, and if all of this happens, it will be the “biggest failure in 200 years” for the United States.

Why have more and more countries been looking for alternatives to the US dollar, which has dominated global trade and reserves for decades? An article by scholar Gago from the School of International Relations at Nehru University published in India’s “Financial Express” recently stated that in the post-Cold War era, the United States, as a dominant global power, often uses the US dollar to pressure other countries or punish opponents. However, the effectiveness of sanctions as a coercion tool depends on the relative status of the relevant countries in the international economic and trade system. As the economic strength of other countries increases, the US’s control over the international economic system through the US dollar is weakening. In particular, the narrowing economic gap between the United States and China has made it more difficult for the United States to impose its will on other countries through the US dollar, which has led to other countries that are also concerned about US financial long-arm jurisdiction seeking alternatives to the US dollar.

The trend of “de-dollarization” could have significant implications for the global economy. The US dollar has been the dominant currency in international trade and finance for decades, and any move away from it could potentially weaken its position as the world’s reserve currency. This could lead to a reduced demand for US treasuries, which could in turn lead to higher interest rates, reduced foreign investment in the US, and a stronger US dollar.

On the other hand, it could also lead to increased demand for alternative currencies, such as the euro or the renminbi, and could boost the internationalization of these currencies. This could potentially reduce the dominance of the US in the global financial system and increase the influence of other countries, such as China, in international affairs.

Overall, the trend of “de-dollarization” could lead to a more multipolar and diversified global financial system, which could have both positive and negative implications for different countries and regions.

There are several examples of countries that are actively pursuing de-dollarization. Here are a few:

1. Russia: In recent years, Russia has been reducing its holdings of US Treasuries and increasing its holdings of gold and other currencies, such as the euro and the Chinese yuan. The country has also been promoting the use of its own currency, the Ruble, in international trade. The United States has frozen Russia’s $300 billion assets in the US due to the war between Ukraine and Russia.
2. China: China has been promoting the international use of its currency, the Renminbi, as an alternative to the US dollar. The country has been signing Currency Swap agreements with other countries and has established several offshore renminbi clearing centers. China is preparing for US sanctions if a war occurs in Taiwan.
3. Iran: Due to US sanctions, Iran has been forced to find alternative ways to conduct international trade. The country has been using alternative currencies, such as the euro and the Chinese yuan, to bypass US sanctions.
4. Venezuela: Venezuela has been reducing its reliance on the US dollar and has been promoting the use of other currencies, such as the euro and the Chinese yuan, in international trade.
5. Turkey: Turkey has been diversifying its foreign currency reverses and has been promoting the use of its own currency, the lira, in international trade.
6. Brazil is another country that has been taking steps to reduce its dependence on the US dollar. In recent years, Brazil has been promoting the use of its own currency, the real, in international trade and investment. The country has signed currency swap agreements with several countries, including China and Argentina, and has established several offshore real clearing centers.

These are just a few examples of countries that are actively pursuing de-dollarization. Other countries, such as India, Malaysia, and South Africa, have also been taking steps to reduce their dependence on the US dollar.