Communist China is using its growing economic clout to internationalize its currency. “Beijing is renewing its push to internationalise the use of the yuan in Southeast Asia under its globe-spanning belt and road infrastructure drive,” the Hong Kong daily South China Morning Post reported Friday.
Beijing will encourage the use of the currency in its ‘trade settlements,’ acquired as part of the ‘One Belt, One Road’ initiative, the Hong King Daily reported. China plans to set up a yuan-based global payment system and sign agreements with foreign government to this end, the newspaper confirmed.
The push comes weeks after the Chinese central bank, People’s Bank of China, unveiled a digital currency to compete with the U.S. dollar. The new digital currency, based on the block-chain technology, will be controlled by the Communist Party-controlled central bank.
The South China Morning Post reported the Chinese push to internationalise its currency:
Amid growing tensions between China and the United States, Beijing is renewing its push to internationalise the use of the yuan in Southeast Asia under its globe-spanning belt and road infrastructure drive.China is stepping up efforts to reduce a reliance on the US dollar for bilateral trade with countries across the region, from Cambodia to Vietnam, as friction with Washington causes uncertainty in trade and financial markets for the world’s second largest economy.Cambodian computer distributor Yako Technology this week conducted the first direct foreign exchange transaction between the riel and the yuan through Bank of China Hong Kong in Phnom Penh, the Chinese bank said in a statement. (…)The region’s total cross-border yuan settlements exceeded 1 trillion yuan (US$142 billion) as of August in 2019.China’s biggest payment apps WeChat Pay and Alipay have been making inroads in Cambodia, making it easier for Chinese tourists to spend money in the country. (…)Boosting the yuan’s use in cross-border transactions within belt and road countries can be viewed as part of Beijing’s long-standing goal of internationalising the currency.China has also encouraged use of the currency in trade settlements, set up a market in Shanghai to trade yuan-denominated crude oil futures contracts, developed a cross-border yuan payment system, signed dozens of bilateral yuan currency swap deals and even created its own multilateral bank.
China holds stakes in power grids, highways, ports and airports in at least 70 countries in Africa and Asia as part of its ‘One Belt, One Road’ project. Initiated by the country’s leader Xi Jinping in 2013, the multi-billion project helps Beijing expand its economic and strategic influence on host countries, many of them stuck in a Chinese debt-trap. These countries won’t be able to negotiate the terms of the ‘bilateral yuan currency swap deals’ or opt out of the Chinese payment system.
Globalizing yuan carries hidden risks for the global economy. Communist China is widely regarded the biggest currency manipulator in the world. The yuan is not subject to market forces, as Communist China sets the exchange rate. For decades, Beijing has kept the currency artificially low, making its export cheaper at the cost of other global competitors.
In August 2019, the yuan fell to a historic low. “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation’,” President Trump reacted at that time. The U.S. State Department labelled Beijing as a “currency manipulator” in response. The classification was dropped in January as part of the U.S.-China trade negotiations.
But Communist China is back to its old tricks. Last month, the yuan fell again, lowest since last year‘s historic drop. This consistent currency devaluation benefits China’s state-controlled manufacturing sectors, raising trade deficits with the U.S., and destroying American jobs.
President Trump calls out China for ‘currency manipulation’ (August 2019)
[Cover image via YouTube]
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