Video Infoblog: CHINA Nail in the Coffin of US Dollar: What's Going On?
China has opened a new front in its economic rivalry with the United States this time targeting the US dollar Chinese banks have reportedly placed significant bets against the American currency aiming for its devaluation according to estimates these financial institutions have funneled more than $100 billion into short positions on the dollar anticipating a decline that would lead to substantial profits the mechanics behind China's currency strategy particularly its use of Foreign Exchange swaps involve a form of financial shorting on the US dollar this approach has allowed Chinese Banks to profit from the Dollar's fluctuations here's how it works Chinese banks exchange win for US dollars in these swaps essentially locking in an exchange rate if the dollar depreciates by the time the deal concludes the American counterpart owes more win which benefits the Chinese Bank this strategy has led to significant activity in the Foreign Exchange Market with estimates indicating that Chinese state-run banks have built up more than $100 billion dollar in short positions against the dollar this trend intensified in 2023 and 2024 as Banks executed these swaps to stabilize the Yuan without draining China's foreign reserves this shorting has become part of a broader effort to bolster the UN which has faced intense pressure due to factors like the federal reserve's hawkish stance and a Slowdown in China's economy these swaps have allowed Chinese Banks to profit from Market movements even yielding nearly risk-free returns of around 6% for Traders on the other side of these deals during During certain periods in addition to currency swaps Chinese banks have been preparing to dump dollars and purchase un as part of ongoing interventions to prevent further un depreciation which has been exacerbated by the global economic environment despite these efforts the UN saw its worst annual performance against the dollar in decades the driving force behind these high stakes bets is China's Central Bank faced with a weakening y Beijing is seeking to stabilize its currency through these Financial Maneuvers when Banks swap un for dollars the UN becomes scarcer in the market which can increase its value this defensive strategy aims to protect the UN as it continues to face downward pressure from a stronger dollar and a sluggish Chinese economy in June the UN hit a seven-month low against the dollar exacerbated by Capital outflows as investors withdrew billions from China however this approach is not without risks if the US dollar continues to strengthen Chinese Banks could face significant losses in fact some reports suggest these institutions have already incurred losses ranging from 5 billion to $16 billion despite these setbacks Beijing is not retreating instead the Chinese government is doubling down on its Financial Ambitions including a planned merger between two state-backed brokerages this consolidation likely to create a $230 billion Financial Powerhouse underscores China's broader effort to revamp its financial sector and comp compete with Wall Street president Xi Jinping personally ordered this restructuring as part of his vision to build top tier investment banks that can rival their us counterparts this move signals China's determination to reshape the Global Financial order and reduce its Reliance on American markets the potential split between the two economic superpowers seems more plausible now than ever before as the US builds trade barriers and encourages companies to reduce their dependence on Chinese Manufacturing meanwhile XI has launched his own campaign to challenge the Western Le Financial system further widening The Divide between the two Nations what was once a deeply intertwined economic relationship marked by us investments in Chinese companies and Chinese firms listing on American exchanges is now evolving into a highstakes geopolitical confrontation that could reshape Global Financial markets to understand this recent move let's talk about the dollarization moves by China over the years let's take a quick pause could you do us a favor if you enjoy our content please hit the like button to help even more leave your thoughts and feedback in the comments your engagement helps us grow thank you China's dollarization efforts represent a strategic shift aimed at reducing Reliance on the US dollar in global trade and finance this move driven by geopolitical factors economic diversification and an attempt to assert greater Financial sovereignty has gained momentum in recent years in March 2024 over 52 2.9% of China's crossb payments were settled in its domestic currency the Reni RMB surpassing the US dollar 42.8% this marks a significant rise from 2010 when the R&B accounted for less than 1% of such settlements countries like Brazil and Argentina have also started settling trade in R&B China has been offloading its Holdings of US Treasury bonds at an accelerated Pace in the first quarter of 2012 24 it sold $53.3 billion worth of us bonds contributing to an estimated $300 billion in total sales between 2021 and 2023 this move is partially aimed at supporting the weakening un which has depreciated against the strengthening dollar China has significantly increased its gold reserves which now account for 4.9% of its total Holdings the highest level since 2015 this shift to gold is part of its broader stratey to diversify its reserves away from the US dollar China's dollarization efforts are closely tied to its participation in bricks Brazil Russia India China South Africa the brics block which collectively accounts for more of the world's GDP than the G7 is working toward expanding its membership and promoting non-dollar trade settlements this initiative gained prominence after the 2022 sanctions on Russia which led to financial restrictions on dollar transactions brics is considering Alternatives like Precious metals and commodity-backed currencies to further reduce Reliance on the dollar China's dollarization push is reshaping Global Financial Landscapes while the US dollar Remains the dominant Reserve currency the increasing use of the R&B coupled with China's diversification into gold and its leadership in bricks could gradually challenge dollar hegemony in certain sectors however challenges such as currency volatility and limited liquidity in non-dollar currencies still pose obstacles to fully dethroning the dollar the bricks group plays a significant role in the global dollarization movement China's push for dollarization aligns closely with brics's broader agenda which seeks to reduce dependency on the US dollar in international trade and finance during the 15th brick Summit in Johannesburg in 2023 the group emphasized the need to move away from the US dollar China and Russia have been leading this charge motivated by geopolitical tensions particularly sanctions placed on Russia after its invasion of Ukraine the group is exploring trade settlements in local currencies a step that has already seen progress for example India recently settled an oil trade with the UAE in Indian rupes showcasing the possibility of using non-dollar currencies within bricks over 40 Nations including key oil producing countries like Saudi Arabia and the UAE have expressed interest in joining the brics block if oil transactions were to Shi shift away from dollar pricing it could drastically alter Global oil markets the expansion of bricks could further empower the group to challenge the Dollar's dominance by leveraging these new economic alliances brics is discussing more Innovative approaches to avoid the dollar such as using precious metals for trade or developing a commodity-backed currency with China and Russia spearheading these efforts there is a focus on gold reserves and commodity-based stability as a hedge against dollar volatility the combined GDP of bricks country has now surpassed that of the G7 Nations giving them significant economic leverage with the potential inclusion of additional Nations brics could command an even larger share of global trade and production further enhancing their ability to influence global currency usage the future of the US dollar is facing significant challenges primarily due to the growing push for dollarization by the brics Nations and other countries in the global South if brics successfully establishes an alternative currency it could reduce Global demand for the US dollar leading to potential inflationary pressures and a weakening of the Dollar's dominance the which has long bolstered the Dollar's status by pricing oil in USD is also under strain as key oil producers like Saudi Arabia are now open to accepting other currencies developing economies are growing at a much faster Pace than developed ones with growth in developing countries projected at 4% in 2024 compared to 1.4% in industrialized nations this dynamism positions the global South particularly bricks as key dollarization countries such as Brazil have seen significant growth in trade with brics Nations which Grew From $48 billion in 2009 to a clear sign of Shifting trade patterns away from the dollar to further reduce dollar dependence brics members are working on establishing new Financial infrastructure including a which could enable crossb transactions using local currencies or digital currencies you us sanctions on countries like Russia and Iran have accelerated the move toward dollarization these countries along with others are increasingly turning to Alternative currencies for trade to avoid the impact of US Financial restrictions that's all for this video thank you for watching this video we sincerely appreciate you joining us today if our content resonated with you or sparked inspiration please consider expressing your support by liking it and subscribing to stay connected with our community your support holds immense value for us you can watch another video of our Channel which is now on the
