Under the Russian-Ukrainian war, the relationship between Russia and the Western world has become more tense. At the same time, China and the United States are competing against each other, and China is actively promoting the concept of the Belt and Road Economic Circle. It is said that at the five BRICS summit in June, the Chinese President Xi Jinping wooed the BRICS countries to resist the United States, and discussed the international currency settlement mechanism based on the BRICS countries’ basket of reserve currencies. It can be said that the two major economic circle camps of the US dollar and the de-US dollar are taking shape.
It is understood that China and Russia have initiated trade in RMB and rubles without the use of US dollars, and China has also proposed to Saudi Arabia to trade crude oil in RMB to de-dollarize settlements.
It can be observed that de-dollarization seems to be beneficial to attracting resource-based countries that keep a distance from the United States. For example, the BRICS countries discuss Iran’s participation, and former Brazilian President Lula’s commitment to strengthen the attitude of the BRICS countries has made the de-dollarization economic circle. The trend is getting stronger.
Under the concept of promoting the economic circle of the Belt and Road Initiative, China is actively promoting the internationalization of digital RMB. According to the estimation of Nomura Research Institute, the transaction ratio of RMB in the foreign exchange market in 2019 is only about 2%, and it may reach 18% in the future. On the other hand, the dollar trading ratio may drop from 40% to nearly 30%.
However, major Asian countries, Japan and Europe, still support the US dollar as the axis currency, because there is no other option other than the US dollar.
However, it is not easy for the United States to maintain a strong dollar. As an axis currency country, it is easy to cause chronic current account deficits after providing the world with a currency that exceeds the size of its own economy.
As China and Russia go to the U.S. dollar to form a non-U.S. dollar camp, and U.S. Treasury Secretary Yellen has also begun to advocate the formation of friend-shoring in allied countries, it may further form economic regionalization, which will have a negative impact on global trade, and even This led to the return of economic globalization after World War II.