China’s plan to erode the US dollar’s world trade dominance
China is waging a hybrid war against the US and Europe, the West, without the shooting. Russia has been waging an all out hybrid war against the West for decades. The difference is China has stepped up the economic, diplomacy and propaganda aspects of its war on the West exponentially since March 2023, with success.
China’s plan has been to unify the nonaligned nations against the West by convincing them that it is in their best interest to weaken the control the West has on the world's economy. Their target is the world’s use of the US dollar as the benchmark currency. China’s strategy is to convert as much country to country trade to local currencies as possible. At the same time, China is locking the nations into intermediate trade agreements with Chinese businesses, with exports in yuan and imports in the exporting countries currencies. The catch is China’s exports to various countries far exceeds its imports from most of them, creating a demand for the yuan. The long term effect of this is that newly developing countries will become depended on the yuan as its currency of choice among them.
When China successfully converts all of its nonaligned trade to the yuan, it will be impossible for the West to impose financial sanctions on them or to freeze them out of the banking system worldwide. It is clear that the plan is to include Russian energy exports in this system in Rubles and imports from China in Rubles. Over time, China’s worldwide export business will erode Russia’s ability to demand Rubles, and they will have to accept the yuan as well as the ruble, which will solidify the yuan as the alternative to the US dollar. An alternative Asia centric trans continental cable system is in the works and a currency exchange system is already in place in Singapore to facilitate such a system. China’s Saudi Arabia-Iran peace deal ins an attempt to woo the Middle East oil exporters away from the dollar and have them join the move to local currencies that ultimately leads to the yuan.
The following are three articles from US media outlets discussing the lack of a coherent plan to mute the impact of China’s fast moving initiative and some suggestions for combating it. Unfortunately, the suggestions are all related to administrative actions, which will do little to slow China’s progress in implementing its agenda.
RUSSIA MATTERS
Harvard Kennedy School’s Belfer Center for Science and International Affairs
The project’s, Russia Matters, main aim is to improve the understanding of Russia and the U.S.-Russian relationship among America’s policymakers and concerned public.
Great Power rivalry/new Cold War/NATO-Russia relations:
“The World Could Move Toward Russia and China,” columnist Ross Douthat, NYT, 04.12.23.
“But outside this democratic bloc, (developed democracies in East Asia and Europe), the trends were very different. For a decade before the Ukraine war, public opinion across ‘a vast span of countries stretching from continental Eurasia to the north and west of Africa,’ in the report’s words, had become more favorable to Russia even as Western public opinion became more hostile. Similarly, people in Europe, the Anglosphere and Pacific Rim democracies like Japan and South Korea all turned against China even before Covid-19, but China was regarded much more favorably across the Middle East, sub-Saharan Africa and Central Asia. Putin’s war in Ukraine shifted these trends only at the margins.”
“The Bennett Institute report ... offers evidence that a divergence in fundamental values, not just a difference in political leadership or perceived interests, is driving the split between developed democracies and the developing world. … This creates a challenge for anyone intent on organizing U.S. foreign policy around current progressive values. Maybe you can unite our closest allies, our liberal imperium’s rich and aging core, around that kind of ideological vision. But you run a real and growing risk of alienating everybody else.”
“How the Ukraine War Has Divided the World,” commentator Gideon Rachman, FT, 04.17.23.
“[There is a] significant divergence in attitudes to the war in Ukraine is...Pratap Bhanu Mehta, an eminent Indian political scientist, points out that for a large part of the world, America’s reaction to the Russian invasion seems to be as problematic as the invasion itself. It is this constituency that China is appealing to.”
“For these countries, the Ukraine war may be regrettable — but it is a conflict to be managed by the pursuit of ceasefires and compromises. S Jaishankar, India’s foreign minister, gave pithy expression to the global south’s refusal to join in the ostracism of Russia, with a much-quoted complaint that Europe thinks that ‘Europe’s problems are the world’s problems, but that the world’s problems are not Europe’s problems’.”
“The U.S. is Failing to Send the Right Message,” former defense secretary Robert M. Gates, WP, 04.16.23.
“Strategic communications and engagement with foreign publics and leaders are essential to shaping the global political environment in ways that support and advance American national interests. In this crucial arena of the competition, however, Russia and China are running rings around us....,the country that invented public relations is being out-communicated around the world by an authoritarian Russia and increasingly totalitarian China.”
“First and foremost, the White House and State Department should develop a global engagement plan for strategic communications to explicitly advance U.S. national security interests. This plan should include a road map for engagement with foreign publics and leaders focused especially on sub- Saharan Africa and Latin America. Underpinning this plan should be a significant expansion of people-to-people exchange programs.”
In short, China has taken advantage of the West focus on the war in Ukraine to significantly move its initiative to end the dollar’s domination of world trade and diplomacy by default forward. It is doubtful that the west will be able to stop the momentum China is amassing in Asia and the Global South.