Anden del af en Merrill-analysen af dollarens globale rolle efter sanktionerne mod Rusland handler om den kinesiske valuta, RMB. Kan RMB eller yuan blive et alternativ? Merrill mener ikke, at den kinesiske økonomi og finansmarked er så stort, at det kan blive en konkurrent til dollaren, især fordi dollaren er knyttet til den amerikansk dominans af det internationale finanssystem. Men Kina er dog ved at udvikle et alternativ til betalingssystemet SWIFT, kaldet CIPS, og det kan gøre det lettere at smyge sig udenom amerikanske sanktioner – som nu med Rusland eller Iran og Nordkorea. Kendsgerningen er dog, at flere og flere lande bruger RMB i deres handel med Kina. Det kan få større betydning, at Kina er langt fremme med at udvikle en digital valuta, CBDC, som Kina kan bruge i sin handel med bl.a. Emerging Markets, som derigennem kan betale med den kinesiske valuta og ikke dollar. Denne teknologiske udvikling kan udgøre en trussel mod dollaren, men Merrill tror, at CBDC snarere vil fastholde det dollar-dominerede betalingssystem.
The U.S. Dollar in the Wake of Unprecedented Economic Sanctions – II
China is trying to side-step the global dollar-based system through internationalization
of the Chinese renminbi (RMB). Will this work? It’s not something that can happen overnight
and the dollar still has enormous advantages. China’s currency internationalization efforts are
aimed at diluting or sidestepping the U.S. dollar’s advantage.
It is building trade relationships
through its Belt and Road Initiative, expanding its sovereign debt offerings, engaging in currency
swap arrangements, and building a competitor to the dollar-based SWIFT system for cross-border
payments, called the Cross-border Interbank Payment System (CIPS). More recently, engaging
Saudi Arabia to accept RMB for oil sales is part of this effort.
However, there is more to gaining reserve currency status than just setting up a parallel transactions
system. While much has been written about the technical and macroeconomic requirements for the
RMB to challenge the U.S. dollar’s reserve currency status, transparency, predictability, trust,
credibility, and forward guidance are other key metrics for central banks, multinational corporations,
and individuals to gauge the investment attractiveness of an economy or sovereign currency. The
macro-level environmental, social and governance (ESG) sentiment that is gaining traction highlights
the importance of these less tangible features and are significant headwinds for the RMB and
others.
Economic size matters less than it used to because of this. A reserve-worthy economy needs to be
relatively large for a number of reasons, but China’s growing economic size does not preordain it to
overtake the dollar. Indeed, by traditional economic metrics like GDP, economic size may be losing its
luster as a gauge of economic might and reserve currency attractiveness. This was a key takeaway
from a recent International Monetary Fund (IMF) report on “Reserve Currencies in an Evolving
International Monetary System”6 and is relevant to RMB internationalization. China has shown that
size does not matter in the absence of key technical features, like deeper, open capital markets.
Trust and credibility are also key factors. “Money is a social and legal construct underpinned by
trust,” according to a recent Fed white paper.
Credibility is most apparent in the debt markets. In an
effort to build both parallel and intrusive RMB-based networks to internationalize its currency, China
is building its debt offerings and trade relationships through its Belt and Road Initiatives and other
multilateral and unilateral trade initiatives, but many of these RMB-based infrastructure deals have
been rooted in corruption and lack debt transparency (for example, lending in Uganda in 2015).
On the U.S. side, efforts abroad will be lost if the U.S. loses the trust of its international partners, and
much of that trust and credibility lies with governance (the “G” in ESG). The relative strength of the
dollar is rooted in its trust and foundational U.S. values, including economic freedom, rule of law,
sound democratic infrastructure, and human rights protections. Academic studies (Bordo and
Rousseau 2006) find these values “are positively associated with financial deepening and
development.” This does not look good for China’s efforts for financial deepening.
Inertia and network effects favor the U.S. International currencies are most useful when other
countries, financial institutions, multinational corporations and consumers use them. From this
perspective, the U.S. dollar has a significant advantage. The dollar has been the preferred global
reserve currency for nearly a century, according to some experts, with its prevalence partly
rooted in its extensive network of alliances, partnerships and trade relations. The crisis in
Ukraine is reinforcing some inertial and network effects with allies and partners.
Could China’s Central Bank Digital Currency (CBDC) help it gain a greater share of global
reserves? Technology has historically played prominently in currency evolution. Technology can
lower the cost of switching currencies and eliminate some of the advantages the U.S. has from
inertia. China’s development of a CBDC could help it avoid the correspondent banking system
since digital currency cross-border payments are essentially cash payments. It is both a
vulnerability and an opportunity for the Fed to maintain relevance and efficiency in delivering
stable value and liquidity.
China could also ultimately use its CBDC to entice emerging markets (EM) or rogue regimes into
transacting in RMB. Importantly, a digital version of a currency that lacks transparency, rule of law, or more technical features adds value only in speed and lower cost. The Fed, through its CBDC
research and own information operations, is likely considering the role of CBDCs in maintaining the
dollar’s role as the dominant cross-border currency.
