China may jeopardize dollar’s authority

By: Tahir Rashid 

China may jeopardize dollar’s authority. It was sensed for almost a decade that China would challenge the dominance of the US dollar, and the economic experts believe that the time has come for this.

Here arises an important question will the rule of dollar, in international trade will be over in a couple of years, and will the era of the Yuan and other local currencies prevail?

The paper currency is like the paper flowers, whether it may be dollars that don’t have their own smell, but all their magnificence is indebted. When its loaned structure would tremble, it would take a few hours to demolish the entire paper palace. The major portion of the dollar’s grandeur is artificial. It is ruling the world based on the impact, it has made over the years, rather than its reality. Whenever this impact vanishes, it would fall on earth.

If one country produces something and another country is buying it, neither the US has anything to do with this give and take, nor does the product go to US markets, but the payment is made for this interchange in dollars. Secondly, every country, including Pakistan, has to retain billions of dollars in the national exchequer to maintain credibility in the international market, which enhances the value of the dollar and in this way, it gains worth globally.

Let’s suppose that the world is not penurious of dollars and each country trades in its local currency, then what will happen to the international economy? If this kind of situation arises, then most countries will not have any need to keep a dollar pile, then it would be difficult for US currency to stand on its own feet.

However, it is extremely difficult to challenge dollar because American power and above  all global financial system is standing behind it and the devaluation of dollar means the collapse of the entire international system.

In the past, some small countries dared to oppose trade in dollars but they faced the dire consequences. The real crime of Saddam Hussain was that he tried to disassociate oil trade with the dollars.

Now robust state like China can confront the supremacy of the dollar as she is so strong financially and militarily that it can bear the upshot.

Back in 2009, China had fielded Yaun in front of dollar on an experimental basis and initially she began trade with 10 ASEAN countries resulting in Yaun seeking momentum, and at present, it has made its worth in a befitting manner.

Some decades ago, 71 per cent of international foreign reserves consisted of dollar, which has now shrunk to 58 per cent.

Now Russia and China are not dependent on dollar in international market as 90 per cent share of their bilateral trade is linked with local currencies. Similarly, almost 36 countries are carrying out their trade with China in Yuan instead of the dollar. Likewise, China and Russia have evolved a new payment system opposing Swift and more than 100 countries, and some 1500 financial institutions have now associated with it. The story does not finish here but BRICS countries are seriously mulling over introducing new currency in front of dollar, which have 36 per cent of world GDP.

China is also working speedily on the policy to get rid of dollar for her reserves. Now she is showing keen interest in gold in place of dollar and now days she is buying gold, which is itself extraordinary move. During the last three years, China has bought 300 tons of gold, which has increased its gold  reserves to 2300 tons. In the future , the assessment of China’s reserves would be carried out in gold and Yuan instead of dollar.

China is the world’s largest buyer of oil from Saudi Arabia, and for a long time, she is making payment for it in dollars, but now this trade is not done in dollars completely, but Yuan is also used for the purpose. With the passage of time, the influence of Yuan will increase and the dependency on dollars will be reduced.

Now the time will tell that the kingship of the dollar will remain intact or not but it is surely said that such threats have emerged that will finish its rule one day.

It was sensed for almost a decade that China would challenge the dominance of the US dollar, and the economic experts believe that the time has come for this.

Here arises an important question would the rule of dollar, in international trade will be over in a couple of years, and will the era of the Yuan and other local currencies prevail?

The paper currency is like the paper flowers, whether it may be dollars that don’t have their own smell, but all their magnificence is indebted. When its loaned structure would tremble, it would take a few hours to demolish the entire paper palace. The major portion of the dollar’s grandeur is artificial. It is ruling the world based on the impact, it has made over the years, rather than its reality. Whenever this impact vanishes, it would fall on earth.

If one country produces something and another country is buying it, neither the US has anything to do with this give and take, nor does the product go to US markets, but the payment is made for this interchange in dollars. Secondly, every country, including Pakistan, has to retain billions of dollars in the national exchequer to maintain credibility in the international market, which enhances the value of the dollar and in this way, it gains worth globally.

Let’s suppose that the world is not penurious of dollars and each country trades in its local currency, then what will happen to the international economy? If this kind of situation arises, then most countries will not have any need to keep a dollar pile, then it would be difficult for US currency to stand on its own feet.

However, it is extremely difficult to challenge dollar because American power and above  all global financial system is standing behind it and the devaluation of dollar means the collapse of the entire international system.

In the past, some small countries dared to oppose trade in dollars but they faced the dire consequences. The real crime of Saddam Hussain was that he tried to disassociate oil trade with the dollars.

Now robust state like China can confront the supremacy of the dollar as she is so strong financially and militarily that it can bear the upshot.

Back in 2009, China had fielded Yaun in front of dollar on an experimental basis and initially she began trade with 10 ASEAN countries resulting in Yaun seeking momentum, and at present, it has made its worth in a befitting manner.

Some decades ago, 71 per cent of international foreign reserves consisted of dollar, which has now shrunk to 58 per cent.

Now Russia and China are not dependent on dollar in international market as 90 per cent share of their bilateral trade is linked with local currencies. Similarly, almost 36 countries are carrying out their trade with China in Yuan instead of the dollar. Likewise, China and Russia have evolved a new payment system opposing Swift and more than 100 countries, and some 1500 financial institutions have now associated with it. The story does not finish here but BRICS countries are seriously mulling over introducing new currency in front of dollar, which have 36 per cent of world GDP.

China is also working speedily on the policy to get rid of dollar for her reserves. Now she is showing keen interest in gold in place of dollar and now days she is buying gold, which is itself extraordinary move. During the last three years, China has bought 300 tons of gold, which has increased its gold  reserves to 2300 tons. In the future , the assessment of China’s reserves would be carried out in gold and Yuan instead of dollar.

China is the world’s largest buyer of oil from Saudi Arabia, and for a long time, she is making payment for it in dollars, but now this trade is not done in dollars completely, but Yuan is also used for the purpose. With the passage of time, the influence of Yuan will increase and the dependency on dollars will be reduced.

Now the time will tell that the kingship of the dollar will remain intact or not but it is surely said that such threats have emerged that will finish its rule one day.