Can China’s Yuan DEFEAT the US Dollar?
Added 2023-04-05 23:32:37 +0000 UTCIt's all about the Benjamins.
—Chris
Comments
Best explanation I have seen and suspected but most news rags, even those on business, don't project this full story. I'm sure Shelley had an input!
Tony Chopkoski
2023-04-10 20:59:08 +0000 UTCAll good points. And I can appreciate you putting that here and not on YouTube. This is what Patreon is for!
China Uncensored
2023-04-07 23:58:54 +0000 UTCPutting this here rather than in the YouTube cesspool. What we're seeing right now is probably China offering desperate deals with selected nations in order to keep their domestic economy afloat. Fiat currencies can be used, and abused, to a massive degree, so long as your country manages to sustain a large enough trade surplus to cover any discrepancies that develop due to hyper-financial utilization from fiat currency backed domestic debt. Between shifts in international trading behavior post-covid(and pre-Covid in select cases), and American sanctions limiting their access to dollars. China is against "a bit of a wall" now. As you've covered previously when their current solutions to many of their problems is issue more more backed by the Yuan. Which they can do, because the Yuan is a fiat currency they control. What that doesn't help them with, however, is financial transactions outside of China. As those transactions use Dollars, something they're becoming increasing hard pressed to come up with in sufficient volumes given the increasing capital intensity(more money in, for fewer dollars out) of investments in China itself. Gone are the days where they could spend a dollar and get five dollars back in return over the next few years. Now it's more like spend $5 now, to get $6 back in a few years, if you get anything back at all. But China's vast industrial throughput machine requires vast amounts of imported goods in order to function. With their trade surplus shrinking, and also suffering reduced buying power due to inflation globally, They need an option that isn't dollars. Enter the UAE, which is currently holding a trade deficit against China. Since they're getting more value(well, for certain definition of value) from China than China is getting from them. For them, switching to the Yuan in trade with China might be a net-win, as all their trade debts will now be denominated in Chinese Yuan, so whenever China devalues the Yuan, China also devalues the debt that the UAE is accruing. Brazil has a trade surplus with China, so they're not going to be a big fan of "unrestricted" trade using the Yuan, but limited trading is likely to be acceptable for two reasons. China is one of their largest trading partners, and in particular. China basically is <b>the</b> import market for Brazilian Soy and Iron Ore. If China threatens to stop buying those things from Brazil, they could flood the global market with those good, but there is only so much demand for Soy outside of Eastern Asia and China in particular, and as China basically is the Global Iron Ore market, a comparable issue exists for Brazil there. Either they allow trade in Yuan, or China is unable to pay for those imports, and Brazil's economy shrinks in proportion to the reduction in Chinese buying power. Therefore, Brazil has little choice but to allow China to engage in at least limited trade with Brazil in the Yuan. But you can be certain Brazil is unlikely to want to treat the Yuan as a reserve currency, they'll be getting rid of it as fast as they can. Which brings us to Saudi Arabia, again, the Saudi government enjoys a trade surplus with China, but China is also their largest trading partner. Loss of Chinese buying power presents "potential problems" for the Saudi's, but I'm suspecting there is more to that story there. The Saudi's are not hurting for money, they are reported to have staggeringly huge amounts of financial reserves. Loss of trade with China wouldn't significantly harm them at all. I halfway suspect that China might have communicated a little too much to the Saudi government, and OPEC in general in their quest to get Oil for Yuan. The recent OPEC production cut is quite possibly OPEC playing hardball with China as they seek a better deal -- for OPEC, not China. If China is strapped for Dollars, the last thing China wants/needs is an increase in the cost of Oil which they need for domestic energy/transportation needs. OPEC knows they'll be the one resource China is most desperate keep flowing into their country, so they can mess with the price all they want, and the tighter the Chinese Dollar money supply becomes, the more "agreeable" the Communist Party must be about the terms for getting Oil with the Chinese Yuan. Of course, from the American side, the more desperate the Chinese get for obtaining resource inputs, with or without use of the USD, the more likely it becomes that China might try for a more militaristic option for distracting the population within China itself. TL;DR the USD is extremely safe as a reserve currency. China is "upselling" their need to basically <b>bribe</b>/blackmail other countries to accept the Yuan in exchange for goods. The fact they're likely needing to resort to bribery and unfavorable trade terms with many of the involved nations, which they'll bury deep, is just demonstrating that China's situation is becoming more desperate, not less.
mark
2023-04-07 20:19:24 +0000 UTC
