Will the Chinese yuan replace the US dollar as dominant global currency?

Ensuring Socio-economic Justice

Crescent International

Safar 14, 1444 2022-09-10

Daily News Analysis

by Crescent International

Russia’s energy giant Gazprom agreed with China to conduct trade in yuan and roubles instead of the US dollar, it was reported on September 6.

The news once again intensified debate about whether the yuan will replace the dollar as the dominant global currency.

While many economic analysts argue against such a possibility, this narrative is largely irrelevant.

The western narrative dismissing yuan from becoming the global currency is often based on default pro-western cultural, political, and economic biases.

Prior to addressing the yuan versus the dollar argument, it is important to be clear that the process of dollar’s diminishing role as the global currency will take time.

While the yuan is in the process of decreasing the dollar’s dominance, it not in a position to replace it yet.

In fact, in the new emerging multipolar world order, it is highly unlikely that a single currency will dominate global transactions.

The reason is simple. Currency domination is linked to political and military power.

The US dollar emerged in a dominant role because of America’s political and military expansionism.

It had little or nothing to do with Washington’s economic policies.

China’s prominence is primarily due to its economic performance, not military or political expansionism.

Those who dismiss yuan in favor of the US dollar often bring up the term, “belief in the US economy.”

The dollar is backed by a belief in American global hegemony, which according to many experts is decreasing.

It should also be noted that yuan is a relatively new currency.

Until about 25 years ago, China’s economy was not so strong.

It was considered a ‘third world’ country, albeit with a huge population that was seen as a drag on its economic growth.

Today China is an economic giant on the global stage.

In economic terms, yuan is a beginner, but because it is a currency of an economy with a massive manufacturing capability, there is something “tangible” behind the notion of Chinese economics.

Thus, just like people believe in the US economy, people have sound economic reasons to trust and believe in the yuan as well.

China is a leading trading hub for the whole world.

This automatically creates demand for its currency as well.

It may soon evolve into a desire by people worldwide to have some yuans as well as insurance.

Debate on the future of the US dollar should not be focused on the replacement aspect, but on how much prominence other currencies will gain in global trade.

The NATO regimes’ economic war on Russia following its attack on Ukraine has once again demonstrated to many developing countries that these regimes will not hesitate to weaponize many economic aspects of the current international relations system.

This understanding has created a demand and a desire not to be dependent on one economic system or its currency.

Thus, the debate about whether yuan will replace the US dollar is irrelevant.

It is almost a foregone conclusion that the world will move away from depending on any one single currency, be it the dollar or the yuan.