The Hegemonic Power of the USD has Been Steadily Declining While the RMB has Been on a Rising Path. This Tendency Could Replace Unipolarity in the Financial World, Creating a Multipolar Harmony, Writes Levente Horváth, Director of Eurasia Center
The yin and yang of the financial world
Eighty years ago, in 1944, the US dollar’s hegemonic role was established at Bretton Woods. The Bretton Woods system fell apart a quarter of a century later, but the dollar’s leadership had by then become unchallenged – even beyond its peg to gold.
Everyone invested and traded in dollars, and in the 1970s, the concept of the petrodollar was born, meaning that oil could only be paid for in dollars. By the early 21st century, the US dollar accounted for 70 per cent of global foreign exchange reserves.
The beginning of the 21st century saw the beginning of a change, a forerunner of a shift in the world order. The role of the dollar began to decline very slowly, with the share of the dollar falling below 59 per cent in the last quarter of 2022, according to IMF data on the currency composition of official foreign reserves.
The euro rose to 27.7 per cent until 2009 before falling back to 20 per cent. The Japanese yen (5.51 per cent) and the pound sterling (4.95 per cent) were joined by the Chinese renminbi (2.69 per cent), which from 2016 also appeared in the SDR basket of currencies as the third most important currency in international trade (12.28 per cent).
Nowadays, there is even more news about the strengthening of the renminbi (RMB): the end of the petrodollar or the birth of the petroyuan, as China, the world’s largest oil importer, can pay Saudi Arabia in RMB for crude oil; the RMB became the most used currency in China’s cross-border transactions in March, surpassing the dollar, according to China’s State Administration of Foreign Exchange (SAFE); Brazil’s government announced that the country reached an agreement with China to trade in their own currencies, ditching the dollar as an intermediary, not to mention that China, the world’s second-biggest economy has made similar agreements with a number of countries, including Russia or Pakistan. The list of such news is growing every day.
And, of course, the RMB’s most innovative development is the digital yuan, which has been researched for almost ten years and tested for four years.
In the financial world, which also defines the world order, the hegemonic power of the USD has been steadily declining while the RMB has been on a rising path. This tendency could replace unipolarity in the financial world with yin and yang, supporting the strengthening of other currencies and thus creating a multipolar harmony.
Resources:
https://t.me/intelslava/49071
https://eurasiamagazine.com/foreword-the-yin-and-yang-of-the-financial-world
