On April 26th, according to research by Bloomberg News Network based on data from the State Administration of Foreign Exchange of China, the share of the Chinese yuan in China's cross-border payments and receipts had risen to 48% by the end of March, while the share of the US dollar had decreased from a peak of 83% to 47%. Also on April 26th, Argentina's Minister of Economy announced that Argentina would stop using the US dollar and would settle all trade with China in full using the Chinese yuan. Why have multiple countries around the world announced the use of the yuan for settlement with our country? Why is the world accelerating the process of de-dollarization? Can the yuan take a step further on the international stage?

Global Acceleration of De-Dollarization

The continuous decline of the US dollar's share in China's cross-border trade is a vivid reflection of the acceleration of the internationalization of the Chinese yuan. As the increase in settlements for other countries as trading partners means the replacement of the US dollar as an international currency, the world is accelerating the process of de-dollarization.

On April 26th, local time in the United States, the US House of Representatives, by a margin of two votes, passed the debt ceiling bill proposed by Speaker McCarthy. The bill proposes to suspend the control of the debt ceiling at the current level of $31.4 trillion before March 31st next year.

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If the two parties can agree to raise the debt ceiling by another $1.5 trillion before this deadline, then this deadline will be void.

In short, the United States is about to flood the market again, raising interest rates on one hand and demanding an increase in the debt ceiling to alleviate the fiscal deficit of the US authorities on the other. Behind this contradictory approach are three major crises within the United States.

Economic recession, inflation, and banking crises are three crises that are mutually restraining and influencing each other.

After the 2008 subprime mortgage crisis, the United States implemented a loose monetary policy known as QE, and to date, it has issued approximately $4 trillion.

The United States has issued a large amount of dollars, and during the pandemic, it has continuously distributed unemployment relief funds to the public. These funds are ultimately converted into US consumption, and most of the products come from all over the world. This is a targeted release of the over-issued US currency to the entire world.A significant portion of this trade balance has largely been purchased by other countries around the world as U.S. Treasury bonds, serving as part of their foreign exchange reserves.

Recently, the two largest creditors of the United States have been reducing their holdings of U.S. bonds.

In February, Japan's holdings of U.S. Treasury bonds decreased by $22.6 billion compared to January, and China held $848.8 billion in U.S. Treasury bonds in February, a decrease of $10.6 billion from January.

It is worth mentioning that China has been reducing its holdings for seven consecutive months, and the total amount of U.S. debt it holds has also reached a new low since June 2010.

Since World War II, the U.S. dollar has been the dominant currency in the international monetary system. After the collapse of the Bretton Woods system, the dollar decoupled from gold, and the United States entered an era of unrestrained dollar printing, continuously harvesting other countries.

The United States has been raising its domestic debt ceiling through loose monetary policy, known as Quantitative Easing (QE), and maintaining its military hegemony globally and high welfare for its citizens by over-issuing currency.

After most countries in the international community began to see through the intentions of the United States and proposed the fact of de-dollarization, the U.S. attempted to salvage the already discredited dollar by raising interest rates, causing global economic turmoil.

The United States has transferred its domestic financial risks to other countries and regions through the dollar tide, including its allies, such as Japan in the 1990s, which threatened the position of the United States, Southeast Asia represented by the Asian Four Little Dragons in 1998, and current Europe and South America, including Brazil and Argentina, all of which have experienced domestic economic turmoil or even collapse due to U.S. dollar policies.

Japan and Thailand are two of the most typical examples. One fell into a deflation that lasted for more than 20 years, and the other, which could have joined the ranks of developed countries, was caught in a middle-income trap.

Global countries have become smarter and no longer allow the United States to dictate terms. The rise of global de-dollarization has further amplified the risks within the United States.However, the United States has not engaged in self-reflection or addressed the root causes of its issues, such as reducing fiscal spending, lowering the extravagant benefits and welfare promises made during election campaigns, or cutting military expenditures to reduce the number of American military bases around the world.

Instead, the U.S. has intensified its targeted easing measures within the domestic banking sector, aggressively harvesting wealth from other countries. After the Swiss bank Credit Suisse faced a crisis, the U.S. conducted a review that led to a drastic drop in its valuation, facilitating an acquisition by Wall Street capital.

Furthermore, the swift sanctions imposed by the U.S. on Russia following the outbreak of the Russo-Ukrainian war have served as a warning to other nations. I have provided a detailed analysis of the steps involved in these sanctions in my article from yesterday titled "Absurd: After China Indicates Continued Reduction of U.S. Debt Holdings, the World Bank Demands China Must Agree to New Regulations"; those interested can refer to it for more information.

It is precisely because of these exploitative actions by the U.S. that multiple countries and regions around the world, including China, Russia, Argentina, Brazil, Saudi Arabia, Iran, ASEAN countries, OPEC nations, BRICS countries, and India, have seen through the true intentions of the United States.

Who can guarantee that their own country will not be subjected to the same sanctions as Russia if their interests conflict with those of the U.S. in the future?

Therefore, a global trend of de-dollarization has begun across numerous countries and regions. As a strong competitor to the U.S. dollar, the Chinese yuan has surpassed the dollar in the proportion of cross-border settlements in China.

Yuan Cross-Border Settlement Surpasses the Dollar

For the first time, the use of the Chinese yuan in China's cross-border transactions has exceeded that of the U.S. dollar. This marks a significant turning point in China's efforts to reduce its dependence on the dollar and serves as a powerful testament to the internationalization of the yuan.

According to research by Bloomberg based on data from China's State Administration of Foreign Exchange, the share of the yuan in China's cross-border receipts and payments has risen from less than 1% in 2010 to a record high of 48% as of April 1st this year. The data shows that during the same period, the proportion of the dollar in China's foreign trade has dropped from 83% to 47%.In the comments section of my numerous articles on de-dollarization, most netizens are fiercely opposed to the status quo and hope for a rapid reduction in our country's U.S. debt holdings to a very low level. However, while the dollar is something that needs to be "de-dollarized," reducing our holdings too quickly could adversely affect the stable development of our economy.

For our country at present, the priority is to increase the proportion of the renminbi in international trade. In addition to China's own trade, we should also provide technical and policy preferences for other bilateral countries to settle their trade in renminbi, such as Russia's bilateral trade with many countries in renminbi.

Especially in recent years, the abuse of the United States' monetary policy and its currency issuance rights has led to a global movement towards de-dollarization, providing significant room for growth for the renminbi.

According to data from SWIFT, the renminbi's share in global payments remained almost unchanged in March, at only 2.3%, which currently has little reference value for our country, as many countries' trades do not settle through the SWIFT channel.

Some netizens have also expressed that China's foreign exchange controls have hindered the internationalization of the renminbi. However, it is important to understand that the increased use of the renminbi could very well be a natural result of China's opening of its capital account, which means that the controls are already well-managed.

The spokesperson for the State Administration of Foreign Exchange revealed on the 21st that the proportion of renminbi in cross-border use is continuously increasing, which helps to reduce the risk of currency mismatch in cross-border transactions.

The official also pointed out in the opinion on promoting the stability and optimization of the structure of foreign trade released on the 25th that there will be a further expansion of the scale of renminbi settlement in cross-border trade.

All these indicate that the internationalization of the renminbi has great potential.

The internationalization of the renminbi has begun to show results.As one of the world's top banks, DBS Bank's consultant Chris once commented, "In other countries seeking an alternative payment currency to diversify risks and the credibility of the Federal Reserve is not as strong as before, the internationalization of the renminbi is accelerating."

On the 26th, another country announced the settlement in renminbi, with Argentina officially declaring it will stop using the US dollar for payments.

Just this month, Argentina has used renminbi to pay for Chinese import goods worth the equivalent of 10 billion renminbi, and this figure will grow along with the economic expansion between China and Argentina.

At the beginning of the year, Argentina has already formally expanded the currency swap agreement with China, and Argentina now has 130 billion renminbi in foreign exchange reserves.

Within the current international monetary system dominated by the US dollar, there are systemic risks, and more countries are seeking to establish a diversified international monetary system.

In addition to Argentina, China has signed bilateral local currency swap agreements with the central banks of more than 60 countries and regions, including Canada, Russia, Brazil, Saudi Arabia, Iran, England, the United Arab Emirates, Russia, Southeast Asian countries, and nearly 60 countries or regions.

Before Argentina, Brazil announced the use of renminbi for settlement, and for the first time, Brazil's renminbi foreign exchange reserves exceeded the euro.

In Russia, the renminbi has already surpassed the US dollar and the euro, becoming Russia's largest trading currency.

At present, countries including China are not looking to create a new currency but are considering the crisis of the US dollar to forge a new global financial order. International trade may no longer need the US dollar.

Due to concerns that Russia may face sanctions from the US and the West again, both sides will not use the US dollar, and India is worried about the value of the Russian ruble and will not use rubles.Russia, due to the fluctuation of exchange rates, will not accept settlement in Indian Rupees. In 2023 alone, the Rupee has depreciated by 10% against the US Dollar. Russia proposed using the Chinese Yuan, but India disagreed.

From this, we can see the continuous rise in the status of the Chinese Yuan, and our CIPS system is also being continuously improved.

At present, the CIPS system has nearly 1400 participants, including nearly 100 direct participants and 1287 indirect participants, covering 190 countries and regions around the world.

To increase the proportion of international payments in Chinese Yuan more quickly, we need to rely on emerging economic banks led by us, such as the Asian Infrastructure Investment Bank and the New Development Bank of BRICS, and use CIPS as a medium for settlement to reduce the SWIFT settlement channel dominated by Europe and the United States.

In Jim Rogers' summary, China has a larger population than the United States, but does not have the huge debt and trade deficit like the United States, which will provide strong support for the Chinese Yuan to become a global reserve currency.