The internationalization of the RMB is a divine assist of the cooperation of the United States and Russia!
The renminbi now accounts for 48% of China's foreign trade and investment settlements, surpassing the 47% of the US dollar, and all this has happened like a flint, as if it were only a few months.
The renminbi formed such a substitution effect on the dollar that not only Americans did not expect, but also the vast majority of Chinese, and the whole world did not expect it. Frankly speaking, Zhan Hao has repeatedly called for China to establish an independent cross-border payment system CIPS long before the construction of the RMB cross-border payment system, and China has been building since 2012. At that time, Zhanhao knew that as long as there was a CIPS system, the speed of RMB internationalization would definitely accelerate, but building such a system was a long process, and the formation of RMB to replace the US dollar was a long process.
However, last year's Russian-Ukrainian war gave the yuan a great opportunity! Until then, even with the most optimistic estimates, this substitution process will probably not be completed in the next decade or two. However, unexpectedly, in the process of this war, the United States wasted its military skills in order to sanction Russia, resulting in a rapid substitution effect of the renminbi against the dollar for more than a year.
Therefore, the internationalization of the renminbi is so fast, we have to thank the United States and Russia for their "cooperation" of divine assistance. The United States provoked the Russian-Ukrainian war, Russia fought the Russian-Ukrainian war, and the United States and its allies froze Russia's more than $300 billion in foreign exchange assets. In this way, the whole world is afraid, Russia cannot keep its foreign exchange assets, so how can we keep it? So, everyone began to look all over the world to see who had a reliable currency other than the dollar.
Euro? Europe has no political autonomy and is not reliable; Rouble? The Russian economy itself is difficult to protect and unreliable. Neither the euro nor the ruble, everyone thought about it, it seemed that only the yuan could work, so they flocked to it. Why does RMB work? Because the RMB is not only stable and can be settled out of the SWIFT system on a global scale, but also has the most important attribute, that is, China's industrial system is developed, and they can buy all the products they need with the RMB.
For many countries, the dollar also has a very large systemic risk for them, that is, once China and the United States are completely opposed and China no longer collects dollars, it will undoubtedly be a heavy blow to the purchasing power of relevant countries. Instead of the fact that the US dollar may not be spent at that time, it is safer and safer to exchange it for RMB in advance.
Therefore, whether from a security perspective or from a practical interest point of view, they will choose the renminbi. What's more, China encourages the use of RMB for settlement, which not only gives priority to Chinese investment, but also gives priority to China's market.
In this context, coupled with the crazy printing and issuance of bonds in the United States in the past few years, a chemical reaction finally occurred, so the countries of the world suddenly woke up and broke out a wave of abandoning the dollar.
The renminbi has frequently broken through, but no one expected that US allies would also frantically sell US dollar US bonds.
According to the latest reports, even G7 members are dumping US dollars and US debt. According to the latest media reports, Britain, France, Germany, Japan, Canada, Italy are all selling US Treasury bonds, including the UK sold $25.3 billion in February, Japan sold $22.6 billion in Treasury bonds, Canada sold $18 billion, and Germany, France, and Italy are all reducing their holdings simultaneously. In February, the mainland reduced its holdings of U.S. bonds by $10.6 billion, bringing the total sell-off to more than $460 billion, reaching 30% of its position. Think about it, why is inflation so serious in the United States? Isn't it because everyone is selling U.S. dollars of U.S. bonds?
The current situation is indeed not good for the United States, because the White House suddenly found that the US debt could not be issued, and the Federal Reserve suddenly found that the US dollar could not be issued. The inability to issue US bonds is reflected in the reality that the US government's debt ceiling has not been raised so far, and the rapid development of the US government has been unable to be achieved; The dollar cannot be issued, which is reflected in the reality that the US market continues to inflate and the Fed has to take violent interest rate hikes.
Now, after the Fed's short-term rate hikes, although the CPI has continued to decline for months, falling one percentage point from February to 5% in March, the core PCE price index in the United States still rose by 4.6% year-on-year in March, compared with 4.5% expected and 4.6% in the previous month. The US core PCE price index rose 0.3% m/m in March versus 0.3% expected and 0.3% prior. In other words, although the rate of price growth in the United States has slowed, it is still rising.
At the same time, if we look at the growth of the US economy, GDP growth in the first quarter was only 1.1%, compared to 3.7% in the same period last year. The Fed and the United Nations both give the US GDP growth rate of only 0.4% in 2023. Against such a background, the Fed cannot cut interest rates for the time being, you say pain is not painful ?!
China, by contrast, fared much better, with GDP growth of 4.5% in the first quarter. Considering the low base of growth in the second half of 2022, it is believed that China's GDP will have a better growth rate in the future, which the United States cannot compare with China.
In fact, this is not the most terrible, the most terrible thing is that the United States simply cannot understand China's tricks.
Yesterday, I saw a news report that many countries have enabled RMB settlement, and the RMB has become the world's fifth largest international reserve currency. The report also said that since the beginning of this year, the process of RMB internationalization has advanced in an orderly manner. The functions of international currencies such as cross-border payment, investment and financing, reserves and denomination of RMB have been comprehensively enhanced, and its international status has also been greatly improved.
In fact, we can briefly list a few cases of countries abandoning the dollar. In February, Iraq's central bank announced that it would abandon the dollar and allow direct settlement of trade with China in yuan. At the end of March, Brazil's central bank announced that the renminbi had surpassed the euro to become the country's second-largest international reserve currency. On March 28, CNOOC and France's Total Energy completed a purchase transaction of 56,000 tons of imported natural gas through the Shanghai Oil and Gas Trading Center platform, settled in RMB. On April 10, Russia's NBD Bank joined the RMB cross-border payment system. At present, the renminbi is the fifth most active currency for international payments, the fifth largest international reserve currency, and the third largest weight in the IMF's Special Drawing Rights basket.
Many media outlets have been eyeing China's own foreign exchange reserves and those of other countries. In fact, in China's view, these are now becoming less and less important, and the importance of foreign exchange reserves in the minds of many countries is declining. Why do you say that? Everything because of China, because of the yuan!
For China, the whole world is now beginning to recognize the renminbi, even France has begun to use the renminbi for settlement with China, does it matter if there are foreign exchange reserves in this case? RMB is foreign exchange reserves! Just like the United States in the past, the dollar is a foreign exchange reserve, so in the past, China's foreign exchange reserves were nearly 100 times that of the United States, but in fact, the US dollar is stronger than China's RMB purchasing power. In the future, the renminbi has "banknote capacity", do we still care about foreign exchange reserves? The US dollars we hold can be greatly reduced! To put it bluntly, the United States will not have much to sell us in the future, why do we hold so many dollars?
Some comrades-in-arms also asked Zhan Hao before, what if a conflict breaks out between China and the United States, and the United States also freezes China's foreign exchange reserves? Now the answer is out, to put it bluntly, the freezing of Russia's foreign exchange reserves by the United States can put Russia in trouble and suffer heavy losses. However, the United States freezes China's US dollar foreign exchange reserves, but it hurts itself more, because the renminbi has become an international currency, and the United States freezes China's US dollar foreign exchange reserves, which will only make the US dollar lose its international credibility faster. If the dollar loses one point of international credibility, then the international credibility of the renminbi increases by one point. Think about it, under such logic, are we still afraid that the United States will freeze our foreign exchange assets? If it is frozen, the internationalization of the RMB will become faster! How much the United States freezes, let's use n-fold substitution to let him return!
So, do other countries still care about foreign exchange reserves?
Of course, at this stage, it certainly cares, but one major change is that many countries are much more solid than in the past. There are three root causes to their change in status:
First, they can use their own country's resources as collateral and get RMB loans from China, so that relevant countries can buy the products they want from China, which can solve their urgent needs;
Second, if the acceptance of RMB can get China's RMB investment, it can promote the economic growth of relevant countries and exchange the market for investment, which is the best cooperation;
Third, relevant countries can even borrow US dollars from China, and then pay off their US dollar debts, and then earn RMB from China to return Chinese RMB.
What do these circumstances mean? It means that the world's settlement currency will not be dominated by the United States alone. In the past, the United States controlled the price of the dollar, and the relevant countries, against the background of the dollar tide created by the Federal Reserve, had to sell assets to the United States and the West at a low price to pay off their debts when they were short of money. Now no need, you the United States does not give the dollar when raising interest rates, and China gives the yuan, which suddenly solves the problem of currency shortage in the dollar shortage stage in the process of the dollar tide, and its accompanying market effect is the substitution of the renminbi to the dollar in the international market.
Therefore, compared with the past, the demand for US dollar foreign exchange reserves in relevant countries has also fallen sharply. Objectively, they only need to do a good job in relations with China and carry out in-depth cooperation with China, and China will not only not take advantage of the fire and robbery, but also give them charcoal. China does this, it turns out that the logic of the United States plundering the world through the dollar tide formed by the dollar interest rate hike cycle does not exist, and the United States cannot carry out financial plunder of other countries in this way, which is why now the United States is in crisis, and the non-Western countries led by China have become more stable economically.
These ingenious tricks of China, now it seems that the United States did not see it at first, or they saw it but could not do anything. If it is the latter, it is because China is following the Yang Mo route. The characteristic of Yang Mo is that even if the opponent understands it, he can't crack it! In the face of China's current scheme, the United States is obviously at a loss and hysterical.
China now has more and more Yang Mou. For example, in the past, the three Baltic countries clucked every day to find crooked things for China on the Taiwan issue, and as a result, a few days ago, Chinese Ambassador to France Lu Shaye "inadvertently" "fell into" the "trap" of the host on French television, saying that the sovereign status and borders of the three Baltic countries have no basis in international law.
When Ambassador Lu Shaye's words came out, the three Baltic countries collapsed at that time and frantically criticized Ambassador Lu Shaye. However, soon they all shut up, and now it seems that they are no longer provoking around the Taiwan issue. What makes people can't help but be happy is that now Polish netizens and Lithuanian netizens are on social media. They got up because Polish netizens found that the sovereign status and borders of Lithuania and other Baltic countries had no basis in international law, and a large part of Lithuania's territory was forcibly transferred from Poland to Lithuania by the Soviet Union after joining the Soviet Union, which means that Poland can reclaim these territories from Lithuania.
Ambassador Lu's remarks really point to the pain points of the three Baltic countries, because whether it is the Bostan Declaration, the Yalta Agreement, or the Cairo Declaration, these important international law documents are not related to the three Baltic countries. Unlike the other Soviet allies, whose independence was recognized by the Soviet Union, the Baltic states achieved their independence through street revolutions, and they did not sign any documents with the force of international law. This means that if the three Baltic countries come chaotically, and China grasps this point, then it may not need Russia to fight, and Poland and Lithuania may have to fight!
Has the United States thought of such a trick as China? However, the claim that the sovereignty of the three Baltic countries has no basis in international law is the first time that the United States saw it. Because, after Ambassador Lu Shaye's words, neither the US nor the British government expressed their position because they understood international law.
In addition to the history of Eastern European countries, China also shot at Ryukyu. Although China does not use the expression that Ryukyu belongs to China "since ancient times", it certainly does not belong to Japan in any case. When China proposed to solve the relevant problems with the rules of World War II, Japan did not even dare to release P!
Now, only South Korea is a stunned blue, and Yoon Seok-yue will pay a heavy price for this in the future! But in general, China is much calmer than the United States, and China is very confident! Of course, in the face of China's tricks, the United States either can't understand it at all, or it can't crack it if it doesn't understand it, this is the power of Yang Mo and strength!