Amid the numerous economic sanctions that the Chinese Communist Party (CCP) has been saddled with by the United States, the balance tipping toward its exclusion from the world dollar system seems a real possibility, according to several analysts.
“We have to mentally prepare that the United States could expel China from the dollar settlement system,” warned GuanTao, a senior global economist at BOC International, the Bank of China’s subsidiary, according to Reuters on Aug. 13.
Another major penalty that the CCP could face is the confiscation of a portion or all of the U.S. Treasury investment securities. These titles amount to $1.08 billion, equivalent to 4 percent of the total of the titles issued.
One of the protective measures that the CCP could implement would be the strengthening of the global influence of the yuan, the national currency, in an attempt to decrease dependence on the dollar.
“Yuan internationalization was a good-to-have. It’s now becoming a must-have,” said Shuang Ding, head of economic research for Greater China at Standard Chartered and a former economist at the People’s Bank of China (PBOC), quoted by Asian News.
The dollar is the main medium of global economic exchange, and international transactions are regulated by the SWIFT organization, through 11,000 banks in 204 countries, making it relatively easy to apply sanctions.
The CCP now shares a similar situation to that of Russia, when Russia also earned significant sanctions from the United States.
As expected, the CCP and the Russia started joint economic activities, trying to evade the restrictions imposed on them by using the global dollar system.
Analyst Tom Joscelyn, a senior member of the Foundation for Defense of Democracies, said that this partnership could involve high global risk.
“Indeed, the Xi-Putin partnership is arguably the most dangerous relationship on the planet today,” Joscelyn warned in an article published in Vital Interest on July 15.
He added, “Xi and Putin share a deep-seated animosity for what was once thought of as the American-led world order. They see it as a threat to their countries’ efforts to achieve great power status and, just as importantly, their authoritarian ambitions.”