China will pursue digital currency, would this break the dominance of USD?

[Khan_21]

USD is still the reserve currency. True. For a long time, maybe not.

USD will be king for a few decades atleast. RMB is not even in top 5 when it comes to reserve currency or international trade. For RMB to truly put a dent in USD it has to open up its market and make its economy free like US. Nobody has any idea how yuan will predict in times of crisis because everything is so tightly controlled by Chinese Government.

 

[Song Hong]

You are not buying your shoes, clothes, laptops from USA. It is a matter of time China tell everyone not to show up with USD, but rather Yuan, in front of her doorstep.

USD will be king for a few decades atleast. RMB is not even in top 5 when it comes to reserve currency or international trade. For RMB to truly put a dent in USD it has to open up its market and make its economy free like US. Nobody has any idea how yuan will predict in times of crisis because everything is so tightly controlled by Chinese Government.

 

[pothead]

USD will be king for a few decades atleast. RMB is not even in top 5 when it comes to reserve currency or international trade. For RMB to truly put a dent in USD it has to open up its market and make its economy free like US. Nobody has any idea how yuan will predict in times of crisis because everything is so tightly controlled by Chinese Government.

Spot on.
As a businessman, why would I invest in yuan when there is a tight leash on it.

 

[CrazyZ]

This is a complicated subject. In the near term, the dollar will remain the dominate reserve currency, however, the yuan will become a bigger percentage of global currency reserve to reflect China's percentage of global GDP. It will take time. The dollar didn't replace the pound overnight either.

 

[Song Hong]

US has bigger economy than UK roughly during 1900. USD become reserve currency in 1945.

Base on this precedent, Yuan should be there around 2060, assuming the continuous decay of USA.

This is a complicated subject. In the near term, the dollar will remain the dominate reserve currency, however, the yuan will become a bigger percentage of global currency reserve to reflect the China's percentage of global GDP. It will take time. The dollar didn't replace the pound overnight either.

 

[Faith_Lock]

This is a complicated subject. In the near term, the dollar will remain the dominate reserve currency, however, the yuan will become a bigger percentage of global currency reserve to reflect China's percentage of global GDP. It will take time. The dollar didn't replace the pound overnight either.

China has the second largest GDP in the world (about 2/3 of USA). Let's say 3 years from now, China's GDP exceeds USA. At the same exact time, China let its currency float. It will automatically become world's reserve currency?

I doubt that. What else is needed?

What event (or events) caused USD to replace British pound as the world's reserve currency?

 

[Song Hong]

1. WW2
2. dismantling of British empire

If UK can hold her colonies, probably pound can still be reserve currency.

So NATO should be taken down first.

China has the second largest GDP in the world (about 2/3 of USA). Let's say 3 years from now, China's GDP exceeds USA. At the same exact time, China let its currency float. It will automatically become world's reserve currency?

I doubt that. What else is needed?

What event (or events) caused USD to replace British pound as the world's reserve currency?

 

[Khan_21]

China has the second largest GDP in the world (about 2/3 of USA). Let's say 3 years from now, China's GDP exceeds USA. At the same exact time, China let its currency float. It will automatically become world's reserve currency?

I doubt that. What else is needed?

What event (or events) caused USD to replace British pound as the world's reserve currency?

This is a big discussion but Chinese GDP is not overtaking US anytime soon. It might come close but its not overtaking it for a few reasons. Chinese population is growing old and what happened to Japan will happen to them pretty soon. US population is young and they keep on attracting talented immigrants. 70-80 % of the innovation you see today is directly or indirectly related to America. US has a big advantage when it comes to science & Technology , Start ups , innovation etc etc. The one edge that China had was 4 times the population of US and that too is growing old now.

 

[Faith_Lock]

1. WW2
2. dismantling of British empire

If UK can hold her colonies, probably pound can still be reserve currency.

So NATO should be taken down first.

Do you know the reason why China won't let her currency float?

 

[Khan_21]

You are not buying your shoes, clothes, laptops from USA. It is a matter of time China tell everyone not to show up with USD, but rather Yuan, in front of her doorstep.

Not until it has a free market economy. Everything is so tightly controlled by the government that nobody is ready to invest in Yuan yet. As of right now its not even in top 5 let alone rivaling USD

 

[Song Hong]

USA issues world reserve currency. She has lots of advantage in waging financial war.

China need to be very careful.

During 1998, the entire S Korea was being sold to USA, and four decades of Korean hard work went down the drain. Today USA owns entire Korea including Samsung...etc. Korea is just USA colony.

China leaders are smart.

Do you know the reason why China won't let her currency float?

 

[Faith_Lock]

This is a big discussion but Chinese GDP is not overtaking US anytime soon. It might come close but its not overtaking it for a few reasons. Chinese population is growing old and what happened to Japan will happen to them pretty soon. US population is young and they keep on attracting talented immigrants. 70-80 % of the innovation you see today is directly or indirectly related to America. US has a big advantage when it comes to science & Technology , Start ups , innovation etc etc. The one edge that China had was 4 times the population of US and that too is growing old now.

Oh, 3 years is just an example. I don't know the exact number. But I think I heard about the year 2030 as the most likely year.

Of course, the trade war and the coronavirus crisis may have completely change the trajectory.

USA issues world reserve currency. She has lots of advantage in waging financial war.

China need to be very careful.

During 1998, the entire S Korea was being sold to USA, and four decades of Korean hard work went down the drain. Today USA owns entire Korea including Samsung...etc. Korea is just USA colony.

China leaders are smart.

What happened in 1998?

 

[Nan Yang]

Oh, 3 years is just an example. I don't know the exact number. But I think I heard about the year 2030 as the most likely year.

Of course, the trade war and the coronavirus crisis may have completely change the trajectory.



What happened in 1998?

Asian financial crisis.

 

[CrazyZ]

China has the second largest GDP in the world (about 2/3 of USA). Let's say 3 years from now, China's GDP exceeds USA. At the same exact time, China let its currency float. It will automatically become world's reserve currency?

I doubt that. What else is needed?

What event (or events) caused USD to replace British pound as the world's reserve currency?

Its a complicated topic as I stated. When the USA went off the gold standard in the 1970's....The fiat dollar was backed the major exporting countries/blocs of the time....Japan, Germany and OPEC. The USA still had a big manufacturing base. Other smaller economy countries had no choice but to keep dollar as reserve or else they could not buy important goods like oil, cars, electronics, machinery etc... from the major exporting countries. With the collapse of Soviet Union....the newly opened countries stayed in the existing dollar order (including China) since their no other option and the system worked.

China can easily get the Yuan backing from OPEC+Russia in time. Germany now backs the Euro. Japan will diminish as its in demographic decline as well the importance of its backing of the dollar. Currently the USA produces nothing....it owns. It not hard for the dollar to lose its value to smaller economies.

The USA financial system is also large, open and sophisticated enough to perform this reserve currency duty. China will have to have similarly capable financial sector to compete with the dollar.

Lets look at Pakistan today.....we need dollars mostly to pay back our dollar denominated debt and buy oil and gas from OPEC. In reality we can import everything we physically need from the GCC (oil and gas) and China (defense products and any consumer item).

Times have changed.....the dollar is more vulnerable then you realize.

 

[Faith_Lock]

Its a complicated topic as I stated. When the USA went off the gold standard in the 1970's....The fiat dollar was backed the major exporting countries/blocs of the time....Japan, Germany and OPEC. Other smaller economy countries had no choice but to keep dollar as reserve or else they could not buy important goods like oil, cars, electronics, machinery etc... from the major exporting countries. With the collapse of Soviet Union....the newly opened countries stayed in the existing dollar order (including China) since their no other option and the system worked.

China can easily get the Yuan backing from OPEC+Russia in time. Germany now backs the Euro. Japan will diminish as its in demographic decline as well the importance of its backing of the dollar. The USA produces nothing....it owns. It not hard for the dollar to lose its value to smaller economies.

The USA financial system is also large, open and sophisticated enough to perform this reserve currency duty. China will have to have similarly capable financial sector to compete with the dollar.

Lets look at Pakistan today.....we need dollars mostly to pay back our dollar denominated debt and buy oil and gas from OPEC. In reality we can get everything we physically need from the GCC (oil and gas) and China (defense products and any consumer item).

Times have change the dollar is more vulnerable then you realize.

From what you said, China's currency needs 2 things to become world's reserve currency. It needs a large, open and sophisticated financial system. It also needs to be quite a bit bigger than other economies.

China is opening up it's financial system now (ironically, partially due to the trade war). So this part can be done in several years.

But to be quite a bit bigger than USA is troublesome. While I think it would probably be bigger than USA in GDP in a decade or more. But to be 1.5X, 2X, that of USA in GDP is very difficult. Khan_21 made a good point. China is aging quickly and is not an immigrant country. Hard to see China can reach the point of being so much bigger than USA so other smaller countries have to use Chinese currency over that of the current one.

---

Interestingly, coming in I thought for sure China is going to have the next global currency. Now, I am not so sure anymore.