In a historic moment for China, the use of the RMB yuan has overtaken that of the US dollar in China’s foreign trade for the first time. This signifies a shift in global economic power and raises questions about the future of the US dollar as the dominant global currency. In this article, we will explore the implications of this development and what it means for China and the rest of the world.
Background.
For decades, the US dollar has been the dominant global currency, used in international trade, financial transactions, and as a reserve currency by central banks around the world. However, China has been steadily increasing its economic and geopolitical power, and in recent years, it has been pushing for the internationalization of the RMB yuan as an alternative to the US dollar.
What Happened?
According to recent data from the General Administration of Customs, the yuan was used in 51.5% of China’s total trade in the first quarter of 2021, surpassing the US dollar’s usage of 48.5%. This marks the first time that the yuan has overtaken the US dollar in China’s foreign trade.
Implications for China.
For China, the increasing use of the RMB yuan in foreign trade is a significant milestone in its efforts to internationalize its currency. It is also a reflection of China’s growing economic power and influence on the global stage. This could help China reduce its dependence on the US dollar and strengthen its position in global economic affairs.
Implications for the US.
The decline in the usage of the US dollar in China’s foreign trade could have implications for the US economy and its status as the dominant global currency. If more countries follow China’s lead and shift away from the US dollar, it could weaken the US economy and increase the cost of borrowing for the US government.
Implications for the Rest of the World.
The increasing use of the RMB yuan in China’s foreign trade could provide opportunities for other countries to diversify their foreign exchange reserves and reduce their reliance on the US dollar. This could also encourage other countries to trade with China using the yuan, which could potentially boost China’s economic influence in the world.
The increasing use of the yuan in China’s foreign trade marks a significant shift in global economic power and raises questions about the future of the US dollar as the dominant global currency. While it is still too early to predict the long-term implications of this development, it is clear that China’s growing economic power and influence on the global stage cannot be ignored. As the world continues to evolve, it will be interesting to see how the global economic landscape shifts in response to these changes.
