How long can the "dollar hegemony" be maintained by many countries "abandoning" the dollar?

China News Network, April 4 (Zhongxin Finance Gong Hongyu) The US dollar, which has dominated the global monetary system for a long time, is being "abandoned" by many countries!

Recently, Malaysian Prime Minister Anwar Anwar, who has just visited China, said that Malaysia has no reason to continue to rely on the US dollar. Bank Negara Malaysia has begun discussions with China to make trade between the two countries settled in ringgit and renminbi.

Following the announcement by Brazil and China that they would no longer use the US dollar as an intermediate currency, and India that India had agreed to use Indian rupees for trade settlements between India and Malaysia, the wave of "de-dollarization" continued to spread globally.

Infographic: US dollars. Photo by Liu Yanghe

"Countries want to ditch the dollar"

Since the establishment of the Bretton Woods system in 1944, the dollar has dominated the world for decades. During this period, the world's criticism of the hegemony of the dollar continued, and the topic of "escaping the dollar" was also raised many times. But the pace and scale of "de-dollarization" has never been more violent.

The Hindu reported that India announced on the 1st that India and Malaysia have agreed to use Indian rupees for trade settlement, which is a decisive step towards de-dollarization.

According to the "ASEAN Briefing" website, on March 3, the formal meeting of ASEAN finance ministers and central bank governors opened. The first topic of the meeting was to discuss how to reduce the dependence on the US dollar, the euro, the Japanese yen and the British pound for financial transactions and move to local currency settlement.

Indonesia's banking regulator said on March 3 that Bank Indonesia is preparing to phase out Visa and MasterCard while rolling out its own domestic payment system.

Brazil has reached an agreement with China to no longer use the U.S. dollar as an intermediate currency, but instead use its own currency for trade, the Brazilian government said on March 3. China's Foreign Ministry also confirmed that China and Brazil signed a memorandum of cooperation to establish a renminbi clearing arrangement in Brazil earlier this year.

On March 3, CNOOC and Total Energy completed the first domestic purchase transaction of imported liquefied natural gas (LNG) settled in RMB through the Shanghai Oil and Gas Exchange Center platform.

In addition, the European Times recently reported that more than 30 countries are gradually switching to the use of RMB in trade settlement or investment.

Many countries have fled the dollar, causing the American billionaire Musk to lament in a recent article, "The (foreign) policy of the United States is too tough, resulting in countries wanting to abandon the dollar." According to Business Insider, the dollar's supremacy in global trade faces great challenges.

Counterattack after being frantically "harvested"

"The hegemony of the dollar has been established for a long time, and it has used its position as a world currency to cut leeks around the world many times." Yang Delong, chief economist and fund manager of Qianhai Open Source Fund, said in an interview with Zhongxin Finance.

"When there is a recession, the United States prints a lot of money to stimulate the economy, and the consequences are borne by the world. And when the Fed needs to raise interest rates to curb inflation, the currencies of other countries around the world have depreciated, which is equivalent to being 'cut leeks' by the dollar. Yang Delong explained.

In addition, what is more worrying is that in the Ukraine crisis, the United States united with many countries to sanction Russia, which caused Russia's export trade to be affected, and countries around the world saw the hegemonic behavior of the dollar.

For example, Indonesian President Joko Widodo, who has urged his government to stop using foreign payment systems such as VISA, mentioned that moving away from Western payment systems is essential to protect domestic trade from "possible geopolitical consequences".

Yang Delong believes that the United States uses the hegemonic position of the dollar to sanction other countries at will, and the "de-dollarization" reflects the needs of these sanctioned countries.

In addition, Chen Wenling, chief economist of the China Center for International Economic Exchanges, told the media that behind the "de-dollarization" of many countries in the world is the distrust of the United States and the dollar. This is both because they question the credibility of the United States and are dissatisfied with the hegemony of the dollar, but also a helpless move with a safe-haven component. The US dollar has now become a major source of instability and uncertainty in the world economy. Recently, the crisis of many US banks such as Silicon Valley Bank has once again become the fuse for the "de-dollarization" of many countries.

Infographic: RMB and USD. Photo by Li Jinlei of Zhongxin Finance

What are the implications of "de-dollarization"?

It is worth noting that among the countries in this round of "de-dollarization", there are some countries that are friendly with the United States. Against this background, the weakening of the dollar hegemony is already an indisputable fact. So, what will be the impact of "de-dollarization" and how far can it go?

Teixeira, former Minister of Trade of Brazil and former President of the World Association of Investment Promotion Agencies, recently said that the use of local currencies for trade between Brazil and China is conducive to commercial exchanges between the two countries, especially to the small and medium-sized enterprises of the two countries. The use of local currency settlements between Brazil and China is an important step.

Chen Wenling told the media that once the "de-dollarization" process begins, it is irreversible. Unless the United States abandons its hegemony and hegemony, acts in accordance with international rules, resolves the US debt, banking and financial crises, and plays a positive role in the global economy, it will be difficult to maintain the dominance of the US dollar.

According to media reports, American economist John Carney warned a few days ago that the dollar may soon lose its "power", and the dominance of the dollar is gradually moving away.

In addition, in this wave of de-dollarization, the internationalization of the renminbi has performed well, and many countries have begun to use the renminbi to trade with China.

Yang Delong said that the degree of internationalization of the RMB has been further improved, which will change the state of the US dollar's "one-currency dominance" to a certain extent, weaken the power of the United States to manipulate the global currency market, and benefit the long-term development of non-American parents.

"'De-dollarization' and currency diversification are the trend of the times, and the US dollar should not stand alone. Non-U.S. currencies, including the renminbi, are also expected to strengthen in the future. Yang Delong said. (End)