Why CHINA wants but can't destroy the US dollar
In 2022, the BRICS countries of Brazil, Russia, India, China and South Africa met to propose the development of a new global reserve currency. And China is said to be pushing for the group to adopt the yuan as a medium of exchange to trade with each other. On January 1, 2024, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates joined the bloc, so already the enlarged group has a combined population of 3,200,000,000 people, or 38% of the world's population, and together they already account for 37% of the world economy. So the geopolitical influence of the group is growing and one of the objectives is precisely to reduce the use of the US dollar. This urgency to dethrone the dollar is due to the fact that the United States is increasingly using it as a foreign policy tool. As the source of the dominant currency, the United States is home to many of the world's largest financial institutions, giving it control of the major networks used for trade and finance. This control allows the United States to use the dollar as a weapon, isolating individuals, corporations and governments from the global financial system. The United States has subjected countries such as North Korea and Iran, and more recently Russia, to this type of punishment in the form of economic sanctions. After it invaded Ukraine in 2022, the United States and the European Union excluded seven Russian banks from SWIFT, the Global Financial Messaging Service. The U.S. country also immobilized some Russian assets, prevented the Central Bank from operating in dollars and banned some of the most prominent Russian tycoons from accessing the international financial system. As a consequence, China wants to reduce its exposure to the dollar if it is sanctioned by the United States should it invade Taiwan. So there is every reason for China to promote the use of the yuan to diminish the influence of the dollar not only in China, but globally. However, the internationalization of a currency other than the dollar is still a long way off. So the questions are: why, despite U.S. monetary policy, is the dollar still the most widely used currency in the world? Why can't China do away with the dollar so easily? And what would it take then to dethrone the dollar?
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