One of China’s leading economists has called for further internationalisation of the Chinese renminbi in order to address the problem of what he refers to as the “hardships” caused by the long-standing dominance of the US dollar in the global economic system.
In a harshly worded opinion piece published on Sina, Chinese economist Ren Zeping (任泽平) says the long-standing global dominance of the greenback has caused “deep-seated problems” both for itself and for the world’s other economies.
“The world has long suffered from the ‘hegemony of the US dollar’!’ writes Ren, formerly the Deputy Director of the Macro Research Department of China’s State Council and now Chief Economist at Dongwu Securities.
“External hegemony is an extension of internal strength. US dollar hegemony is built on the political, economic, and military strength of the United States, and has become a tool for the United States to frequently print currency, impose taxes and financial sanctions, exercise forms of extraterritorial jurisdiction, and ‘fleece’ others.”
Ren expressed extremely bearish sentiment on the US dollar, due to both the internal and external problems of the US economy.
“As the United States hollows out its industries, piles up debts, experiences internal divisions, and engages in irresponsible manipulation, the foundation of the US dollar hegemony is continuously weakening,” he writes. “This is also the twilight of the empire, with adjustments to financial strength still lagging behind economic shifts.
“Internally, the United States is plagued by trade deficits, industrial hollowing-out under a low savings and high consumption model, soaring debt and fiscal deficits and widening income disparities, all of which have worsened in the post-pandemic era.
“Externally, the United States controls the global cross-border payment system, frequently implements financial sanctions, freezes assets, uses its voting power in international organizations to restrict other countries’ financing channels and conditions, levies currency taxes on the world, exports inflation to devalue debt, and dilutes the foreign exchange reserves accumulated by other countries.
“Other economies are forced to bear imported inflation, debt devaluation, and financial volatility.”
With Sino-US tensions worsening since the Trump presidency and in the wake of the Covid pandemic, Ren called for Beijing to adopt more concerted measures to drive use of the renminbi outside of China, in order to shore up its own economic and financial security.
“Looking ahead to the future, we should continue to steadily promote the internationalization of the RMB on the basis of protecting China’s foreign exchange and financial security,” Ren writes.
“Starting with the trade settlement function, China should gradually expand the internationalization of the renminbi to cover investment and financing functions, reserve functions, and pricing functions.”
Ren also called for the Chinese government to strengthen its financial system and capital markets, and improve cross-border capital flows and regulation.
With regard to foreign exchange reserves, Ren called for China to focus on balancing security and profitability, and gradually reduce its holdings of US dollar assets while strategically increasing the share of high-tech enterprise mergers and acquisitions and strategic reserve resource allocations.
“The most fundamental aspect is to focus on our own affairs, deepen reform and opening up, and prioritize development,” Ren wrote.
“China adheres to the concept of a shared human destiny, which is the cornerstone of world peace and development. As long as we focus on our own tasks, persist in reform and opening up, and prioritize development, time is on our side. We will embody both inner sagacity and external nobility.”