Beijing Accelerating Plans to Replace US Dollar as World Reserve Currency: Chinese Professor

One dollar and 100 yuan notes are on display at a bank in Beijing, China, on May 15, 2006. (China Photos/Getty Images)
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BY NICOLE HAO AND CATHY HE

The Chinese regime is accelerating its efforts to challenge the U.S. dollar’s dominance in global markets and trade by taking advantage of the economic shifts caused by the pandemic, a Chinese professor recently revealed.

In the post-pandemic world, China should be the “one who decides the benchmark of value,” Di Dongsheng, associate dean of the School of International Studies at Renmin University in Beijing said in a video posted on Chinese social media on Feb. 4. “The currency that fixes the price will eventually be the renminbi.”

The professor last April described the pandemic as an opportunity “unseen in 100 years” for the regime to realize its goal of making “all seven billion people in the world pay for [China].”

If the Chinese yuan (or renminbi) achieves global hegemony, Beijing will be in a position to print more money to dilute the value of yuan held by the world’s population—thus transferring wealth to China, he said.

Di gained notoriety late last year when a video of his speaking spread widely in the United States where he said the regime influenced the United States for decades through “old friends” on Wall Street.

The professor has “contributed to China’s foreign economic policy,” and regularly participates in policy discussions and overseas visits with various bodies of the Chinese regime, such as the foreign ministry, the state planning agency, the National Development and Reform Commission, and the International Liaison Department, which falls under the Chinese Communist Party’s Central Committee, according to his biography on the Renmin University website.

Di Dongsheng, associate dean of the School of International Studies at Renmin University in Beijing, talks about how to replace U.S. dollar as world reserve currency in Beijing, China on Dec. 28, 2020. (Screenshot/Guan Video/Bilibili)

Seizing a Golden Opportunity

The Chinese regime has been a major beneficiary of low-interest rate policies adopted by Western economies as they rushed to stem the economic fallout from the pandemic. Foreign investors have bought up China’s higher-yield bonds, pumping $135 billion into Chinese bonds in the 12 months ended Sept. 30, 2020, according to Bloomberg.

Global economic theory states that investors, credit concerns aside, would naturally divert funds away from low-interest rate economies (the U.S. for example) to high-interest rate economies (China for example). And to purchase Chinese bonds denominated in yuan, the investor would be required to sell dollars (currency of the low-interest rate economy) and purchase yuan in order to purchase the yuan bonds. This action, in theory, would increase the value of the yuan and devalue the dollar.

Di suggested last April that the regime should leverage the opportunities presented by the pandemic to attract more global investors, and release yuan to support foreign countries and companies in need of cash.

The Chinese regime has long expressed a desire to uproot the U.S. dollar as the world reserve currency. In 2009, then-governor of the regime’s central bank, Zhou Xiaochuan, called for the U.S. dollar to be replaced with an international reserve currency so the yuan could exert more influence.

According to the data compiled by the International Monetary Institute of Renmin University, the Chinese yuan’s share of global payments increased from 0.02 percent in 2011 to over three percent in 2020.

A Chinese bank worker checks a U.S. 100-dollar bill together with stacks of 100-yuan notes at a bank counter in Hefei City, Anhui Province, China, on Sept. 30, 2010. (STR/AFP/Getty Images)

The yuan, however, still has a way to go to chase down the U.S. dollar’s dominance.

Di suggested the regime should issue loans to developing countries who otherwise would not be able to get loans from developed countries. This way, the regime could collect high-interest payments to offset the cost of relatively high-interest rates China pays on its bonds. But this ploy also faces higher risks of default.

Last April, Di implored the regime to be “extremely giving” to these developing countries. He suggested that Beijing could even sell its vast stash of foreign exchange reserves to provide for these loans.

Di said the flipside of taking on a large number of creditors is that it could push the yuan to strengthen too much and impair the regime’s ability to control the exchange rate. This presents a huge challenge for the regime—which has historically relied on a weak currency to spur exports.

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