Dr M predicts Chinese yuan will replace USD as trade currency

[LASER1]

Currency is just another commodity whose utility determines how popular it is going to be. Once a commodity's popularity grows, after reaching a certain level, it tends to snowball. People always want simpler way to achieve the same purpose. But ultimately which currency an exporter or an exporting country prefers for the goods/services is determined by the country from which they can import. The purpose of export is always the import.

I wish there really is a shift to another currency. But the fact is USD keeps growing. It will continue to do so unless there's a major collapse in US economy. And even the earlier evidence suggests that i.e the 2008 crisis, many countries incl China pegged their currency back to USD to soften the shock.

The second part sounds a bit like crypto (are you trading?). Yes, you're right, people want simpler ways and countries decide which currency they want to trade in. The fact is, most of these countries have a trade surplus with US. Take China which has nearly $400billion in surplus with US, or EU which has a similar trade numbers.
Maybe China can start with the African continent, given their favorable position out there or through BRICS if there's a better deal India would love to trade in non-USD currencies.

 

[nang2]

I wish there really is a shift to another currency. But the fact is USD keeps growing. It will continue to do so unless there's a major collapse in US economy. And even the earlier evidence suggests that i.e the 2008 crisis, many countries incl China pegged their currency back to USD to soften the shock.

The second part sounds a bit like crypto (are you trading?). Yes, you're right, people want simpler ways and countries decide which currency they want to trade in. The fact is, most of these countries have a trade surplus with US. Take China which has nearly $400billion in surplus with US, or EU which has a similar trade numbers.
Maybe China can start with the African continent, given their favorable position out there or through BRICS if there's a better deal India would love to trade in non-USD currencies.

US is still the largest economy in the world so USD dominance is going to last for a while. That is why I think Dr. M's words are just bullshit.

Pursuing trade surplus makes no economic sense but may make political sense. After all, there is no pure free market that is outside of political influence. You need to be political cordial with a country whose market you want to tap into. Too much surplus, however, means too much dead money sitting there not being better utilized. China's Africa strategy may be a way to deal with it. If you cannot buy from US with USD, buy from Africa with USD, either political influence or actual goods/services.

PS. I don't trade bitcoin. I don't think there is much real use for that, yet. Much of its recent hype is pretty much just a hype.

 

[Huan]

Replacing the dollar's dominant global role with the Chinese yuan requires physical insurance like a very huge navy fleet. China's financial strength needs to be backed up by its military might. Washington will not let its financial position be overtaken without utilizing its vast military resources.

 

[TaiShang]

@TaiShang would China force the adoption of Yuan someday?

China has been doing it in the soft way with its trade partners but, I think the present situation still benefits China as it allows the US burn out national energy, alienate friends, and lose markets.

There is no need for a radical move that would allow the US to go further extremes than a trade war/economic war.

Made in China 2025 already put the US on extremely sharp-pointed tender-hooks, hence, the extremist voices in the US Congress and Administration have grown considerably.

Oil would continue to be traded in USD but, as Shanghai Futures joins the club (which gives trading countries to buy/sell in Yuan or Gold), the US share will decline incrementally.

What is more important for me at the moment is China doing its own trade in local currency. Being world's largest trading nation, this would benefit both China and trading nation. There is little strategic gain at the moment to challenge the PetroDollar by pushing the hands of Saudi Arabia. That would be too much.

***

Dr. Mahathir has been talking hypothetically and for the long-term, not arguing that Yuan is going to replace the Dollar and this will happen tomorrow at China's will. So, the title betrays a little the content. As a smart politician, I would in fact not expect Mahathir to make such grandiose claim. And he does not. So, some people here judges his argument by looking at the title, rather than the content of his speech.

20 years ago they were a creditor nation, now they biggest debtor nation. They can't pay back. Although I don't doubt US will not go peacefully. Trump is proof.

This is in fact still a good outlook. As it was some four years ago. Now, US's NIIP is at a handsome minus 9 trillion USD.

 

[powastick]

China has been doing it in the soft way with its trade partners but, I think the present situation still benefits China as it allows the US burn out national energy, alienate friends, and lose markets.

There is no need for a radical move that would allow the US to go further extremes than a trade war/economic war.

Made in China 2025 already put the US on extremely sharp-pointed tender-hooks, hence, the extremist voices in the US Congress and Administration have grown considerably.

Oil would continue to be traded in USD but, as Shanghai Futures joins the club (which gives trading countries to buy/sell in Yuan or Gold), the US share will decline incrementally.

What is more important for me at the moment is China doing its own trade in local currency. Being world's largest trading nation, this would benefit both China and trading nation. There is little strategic gain at the moment to challenge the PetroDollar by pushing the hands of Saudi Arabia. That would be too much.

***

Dr. Mahathir has been talking hypothetically and for the long-term, not arguing that Yuan is going to replace the Dollar and this will happen tomorrow at China's will. So, the title betrays a little the content. As a smart politician, I would in fact not expect Mahathir to make such grandiose claim. And he does not. So, some people here judges his argument by looking at the title, rather than the content of his speech.



This is in fact still a good outlook. As it was some four years ago. Now, US's NIIP is at a handsome minus 9 trillion USD.

His suggestion of East Asian currency, would it be reasonable?

 

[TaiShang]

His suggestion of East Asian currency, would it be possible?

I remember from my East Asian Regional Development class, that, all the way back in the 1990s, he actually voiced the idea of an East Asia Economic Community (EAEC). That was the time when regionalism was taking off. Then, soon after the 1997 crisis, Japan, surprisingly, came out with the suggestion of an Asian Monetary Forum (AMF).

China, back then, was somewhat colder to exclusive regionalism, although not much (and not with much actual capability back than, given that in the early 1990s, China's GDP was smaller than that of India).

Nonetheless, both ideas have been swiftly killed of by the US (mostly through Japan itself).

A currency now would suggest that an economic community has already been established and customs union has been achieved. Maybe, the ASEAN is the one sub-region closest to the actualization of a real economic community and, from there, we can move into common currency realm.

In the meantime, we need to watch what is going on in another sub-region, Northeast Asia. Apparently, NEA is nowhere as close being an economic community. Only if the negotiated CJK FTA is realized, then, we can say the first step is taken.

Now, the next big task would be to unify the two sub regions, starting off an East Asian Economic Community (The first step would be an ASEAN+3 FTA).

How would the US, Australia, NZ react to this?

The US is adamantly against a united East Asia. Japan often complies and kills of ideas of exclusive regionalism. The region has to overcome the destructive effects of US intervention.

Mainland China has become warmer to the idea of exclusive regional institutionalization. There will be no problem on that side.

My mid to long term dream is to see the CJK FTA being completed and then the ASEAN+3 becoming an economic community first with an FTA, then with customs union, regional electricity supergrid, and a soft form of security organization (with real military capability).

With ASEAN+3 becoming an exclusive economic community, a common currency would be easy to realize.

Too much external (US) interference is the biggest obstacle.

I know, from the very beginning, Dr. Mahathir has been a proponent of an EAEC (and then EAC - economics plus politics). That is, the East Asian Union.

History moves on in an interesting way. Maybe, as the Transatlantic cooperation fractures and the EU faces challenges, East Asia becomes the next big regionalism story. Young generations (politicians, scholars, bureaucrats) must work toward this goal.

 

[925boy]

This guy is definitely not a good man. This is the tongue of a snake.

he should remember what happened when Gaddafi talked about something similar....but hes also 93..maybe hee even thinks hes lived too long..

LOL

 

[Cybernetics]

My mid to long term dream is to see the CJK FTA being completed and then the ASEAN+3 becoming an economic community first with an FTA, then with customs union, regional electricity supergrid, and a soft form of security organization (with real military capability).

The "Plus 3" aspect is vital to the success of long term regional development, it can start off more bilateral but what is important is vigour, breadth and depth in engagement. China, Japan, Korea represents the industrial core. It is the capital rich area of the region, the area of high value industrial activity and in the future, the core of defence product exports for the region. This regional advantage needs to be further developed, currently it is not sufficient. Naturally this creates a symbiotic relationship between ASEAN and Plus 3 in all spheres of activity. Convergence of interests, would facilitate regionalization, China has the responsibility to act as the catalyst due to its weight and geography.

We are decades away from finishing the ground works for a more institutionalised region as nations still needs to grow to meet future demands. For now, greater engagement and connectivity is needed. In many respects, it would be advantages for China to squeeze South Korea and Japan more to compel them to further domestic development and develop deeper ties with ASEAN. Instead of China relying upon South Korean corporate for employment, China should and is developing competitors in the same fields. This squeezing action catalyses high end industrial growth domestically and compels South Korea to undergo further industrial upgrade, diversification, policy changes, and deeper regional understanding. I am quite in favour of South Korean multi nationals expanding their operations in Vietnam instead of focusing on China. China will still engage but in other less visible segments. Catalysing Japan to feel a sense of urgency to deepen regional interests is also important. Recent initiatives by China to export HSR and other rail products has proven to catalyse a sense of urgency upon the Japanese, it was their core competency. To compete for market space, they had offered low rates and engaged more strategically with the region. It is important for China to catalyse a "friendly" competition amongst Plus 3 nations and any able new comers, this will not only benefit ASEAN but the Plus 3 themselves as well. A positive feed back loop takes certain burdens off China in regional affairs.

 

[ranawat]

KUALA LUMPUR, Sept 3 — Prime Minister Tun Dr Mahathir Mohamad said today he will not be surprised if the Chinese yuan takes over the United States dollar as a global trading currency.

Speaking at University of Brunei today, the 93-year-old prime minister pointed out that 1.4 billion Chinese who are very productive, dynamic and wealthy might just decide that anyone trading with them must use the Chinese currency rather than the US greenback.

“Imagine 1.4 billion Chinese who are very productive becoming very, very rich... why should they use the US dollar? They are the people with the money, property with the wealth.


“So one day they may decide that if you want to buy, you have to use the Chinese currency. And you will have no choice, you will have to use Chinese currency. I don’t know how long we can resist, but it will come one day,” Dr Mahathir said.

However, he also pointed out that such a move will definitely displease the United States of America which will go bankrupt if the US dollar is no longer used as the world’s trading currency.

Explaining how the US currency became the world standard, he said at one time an ounce of gold was the equivalent of US$36 (RM148), but today the price is US$1,200, forcing America to go off the gold standard while “maintaining the fiction that it carries the same value”.

“Now one ounce of gold is about US$1,200. That’s how much the US dollar has depreciated but we have been brought up to think of the US dollar as the standard. Why should the US dollar be the standard?

“Other currencies too can be the standard but the US will feel very unhappy if you drop the dollar as the standard for currencies. If you don’t use the US dollar, the US will go bankrupt immediately because it owes the world 14 trillion dollars which they cannot pay.

“They don’t have that much gold to pay. So if you switch from US to the Chinese currency, the US is going to feel very unhappy and I think some people had ideas about that and they have been taught not to have such ideas,” he said.
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@TaiShang would China force the adoption of Yuan someday?

May be in 2050 , when half of the world will start working in Mandarin.

 

[Viet]

Replacing the dollar's dominant global role with the Chinese yuan requires physical insurance like a very huge navy fleet. China's financial strength needs to be backed up by its military might. Washington will not let its financial position be overtaken without utilizing its vast military resources.

Nonsense. A strong currency is not backed by military power. It is backed by strong industrial base,enormous trade volumes, steady high current account surplus, high savings rate and independent central bank.see Germany. Should today the Germans decide to go back to the DM, all currencies in Europe would collapse tomorrow. Even the US dollar would massively decline in value.

The PLA does not need more ships.

 

[TaiShang]

Convergence of interests, would facilitate regionalization, China has the responsibility to act as the catalyst due to its weight and geography.

Definitely agree. Regionalism probably does not need everybody to be on the same page in terms of internal politics, development level or even foreign relations, but it definitely needs complementarity - something that would push the actors to cooperate naturally. At least, as an initial catalyzer. Because, EA still has not achieved a constructive understanding of regionnes, a sense of "Us East Asians." We are still on the material grounds, not much on ideational grounds. Perhaps that's why Dr. Mahathir's decades old dream has not materialized much. There should be one group complementing the other - one providing finance/capital, the other know-how, the other quality workforce, the other materials etc. I guess, even the EU still runs on this principle. Not everybody is perfectly equal, but everybody benefits, and the ship rises up altogether.

I also agree that China needs to be more proactive. It needs to set up strong theoretical grounds. Sadly, as far as my experience in Mainland China goes, regionalism studies are not taken seriously in most university departments. I was surprised to hear when I talked to a vice dean in a PoliSci department of one of top Mainland Universities that the dean thinks of regionalism studies as mere geopolitical analysis. For the dean, then, regionalism study basically means geopolitics, and no economics, public policy, culture and social communication. I believe, in Taiwan, we have much better regionalism studies.

China needs to lead, not trail and only react. I would like to see China to launch as forcefully as the BRI a regional process, something that both complements and reinforces the BRI.

I also agree with you that the core of an Asian region making needs to be the NEA. Otherwise, it cannot move on. ASEAN has done a terrific job so far, but, NEA needs to claim more stakes and starts to lead.

 

[LeGenD]

Yuan - as a high value global reserve currency (in the shoes of USD) - is not suitable for Chinese economic model.

 

[Viet]

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@TaiShang would China force the adoption of Yuan someday?

Mr M should buy more fighter jets to increase the value of Malay dollar then he can force ASEAN to adopt Malay as leader.

Man, the value of a currency is much like buying or selling bananas on a flea market. supply and demand.more demand than supply means appreciation, less then the opposite.the US dollar is international reserves currency because it is not only very easy to buy and sell US dollar and assets.hence the high demand. I myself needs just a mouse click to trade in US dollar and securities.can I do it in Chinese assets? Ok unless I know Xi Jinping in person.or buying via HK with a premium.

Look at the value of Argentina peso and Turkish lira.the value is crashing because of collapse of buyer confidence.I recommend the Chinese learn the lesson from the Japanese. China has a long way to go before reaching the status of the Yen today.

 

[powastick]

Mr M should buy more fighter jets to increase the value of Malay dollar then he can force ASEAN to adopt Malay as leader.

Man, the value of a currency is much like buying or selling bananas on a flea market. supply and demand.more demand than supply means appreciation, less then the opposite.the US dollar is international reserves currency because it is not only very easy to buy and sell US dollar and assets.hence the high demand. I myself needs just a mouse click to trade in US dollar and securities.can I do it in Chinese assets? Ok unless I know Xi Jinping in person.or buying via HK with a premium.

Look at the value of Argentina peso and Turkish lira.the value is crashing because of collapse of buyer confidence.I recommend the Chinese learn the lesson from the Japanese. China has a long way to go before reaching the status of the Yen today.

Mahathir didn't say that. But everybody knows what happens if you want to abandon the dollar. That why the entire room laughs when he hinted that the US would be very unhappy. You cannot abandon the dollar, or else! Also US had been weaponizing the dollar, look at Turkey.

 

[Viet]

Mahathir didn't say that. But everybody knows what happens if you want to abandon the dollar. That why the entire room laughs when he hinted that the US would be very unhappy. You cannot abandon the dollar, or else! Also US had been weaponizing the dollar, look at Turkey.

Mr M plays doubleface politics.I doubt the Chinese will buy his words. Anyway there is no doubt the Yuan will become international reserves currency it is just a matter of when, and how fast China opens the domestic security markets. Turkey is a different story. The Turks under a Islamist leadership unfortunately act like many failed states in Africa, South America and elsewhere. Little substance under the surface. A small wind brings the entire system to collapse.