GROWTH OF THE YUAN’S IMPORTANCE IN THE WORLD FINANCIAL FLOWS: CRITICAL IMPORTANCE OF GLOBAL CURRENCY FOR SUPER-POWER STATUS
Keywords:China, Yuan, Blockchain, Currency Internationalization, the US, Dollar
For years, the Chinese modus operandi in pursuing the internationalization of the national currency is based on encouraging domestic and foreign companies to use RMB for trade invoicing. Furthermore, China is increasingly reliant on off-shore markets to develop a financial clientele for its currency, while its central bank has negotiated a number of currency swap arrangements. Certainly, Beijing should allow freer access for foreign investors to its financial market, but it could, in return, lead to the dangerous overindebtedness of many corporations. As an essential element of internationalization of the yuan is blockchain's technology, with Beijing already developing applications for 'blockchain's system. If China’s digital currency is adopted in more countries, the US’s oversight and regulation of the global financial system would get challenged.
It is clear that there is a tension between financial liberalization and China’s growth model, which largely relies on state-owned companies using subsidized loans. In addition, Beijing has to fix financial supervision, strengthen corporate governance and proceed with structural reforms. In the medium and long term, it seems almost certain that the share of the Chinese currency in international financial flows will increase, which will lead to a significant decrease in the international role of the US dollar.
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