The Bigger Threat: Balloons or RMB?
In my early 2022 article “Why I’m Not Afraid for Taiwan,” I predicted that weaponization of the dollar would accelerate RMB’s path towards becoming a global currency. I spoke about this again during December’s episode of Rayliant Perspectives LIVE! And today, Barron’s published my article “China Wants Its Currency to Have Global Influence: U.S. Sanctions are Paving the Way”
Although much of the media is currently focused on Chinese balloons, the emergence of RMB as a global currency presents a much greater risk to US hegemony. Over time, RMB’s ascent will have major implications for China's onshore equities markets.
I believe RMB’s status as a global currency is inevitable. I also believe the timeline is uncertain. After all, it took the greenback decades to cement its current status. But much like the US dollar was built on post-war exports, China—as the world’s factory—will begin demanding payment for goods in RMB. Meanwhile, weaponization of the dollar in Russia will make some countries consider non-USD currency reserves. We have already seen this during President Xi’s recent trip to Saudi Arabia, and even India has expressed openness to the idea.
I discuss this in greater detail in my article in Barron’s, which I hope you will take the time to read (especially since they were kind enough to publish it). Regardless of precisely when it happens, RMB’s journey to becoming a global currency had to begin with a single step – and footprints are already in the sand.
As always, if you’d like to learn more about Rayliant’s strategies and ETFs, please visit https://funds.rayliant.com. Please also feel free to drop me a line if you’d like my thoughts on China, emerging markets or related topics.
Assistant Vice President - Senior Technical Business Systems Consultant at Wells Fargo
1 年As the US continues to freeze assets of other countries, it could raise the risk of holding US Treasuries by foreign entities and require higher interest rates for investing in Treasuries.
Chief Investment Officer at Machan Capital
1 年Weaponizing the dollar against Russia will in hindsight prove a very short-sighted move. Many people, myself included, were aghast when it became clear that Biden was moving this way in March 2022. You are right that RMB will be a beneficiary, though I’d add that eventually the world may stabilize into more of a multipolar currency state with the USD’s market share taken by countries not so closely aligned with the US. Right now RMB is the obvious candidate, but perhaps over time there will be others as well.
Senior Investment Strategist | Lifetime Learner
1 年Thanks for sharing, Jason! This has been a topic for us as well. Interestingly, central banks have been slowly diversifying their reserves since 2000. While the dollar remains dominant, new competitors are emerging. With the weaponization of reserves and the recurring debt ceiling silliness, it seems we may have an environment where the trend could begin to accelerate. IMF has some good data (and a brief on the decline) here: https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4
Next Trend Realty LLC./wwwHar.com/Chester-Swanson/agent_cbswan
1 年Thanks for Sharing.