Text | Hearing the sound of the green tree
Edit | Hearing the sound of the green tree
Sources: All of the information stated in this article is based on reliable sources, and is detailed at the end of the article
Preface
In 2016, the U.S. launched a trade war against China that lasted for years and wreaked havoc on both economies.
Recently, many netizens pointed out that judging from the current information, it is very likely that the winner of this trade war has been decided, and the final winner is China.
Currency war between China and the United States
Currency wars themselves are the most important form of trade wars, and if they can be won in the currency war, they will be invincible in the economic competition. The currency war between China and the United States has always existed, but it has not gradually heated up since Trump took office.
The United States has adopted a variety of means in its currency war against China, including but not limited to deliberately lowering the dollar exchange rate, enhancing the international competitiveness of American goods, intervening in the international market with Europe, Japan, South Korea and other allies, and controlling the global financial sector.
The reason why the United States and the West are trying to launch a currency war against China is that they want to use the currency war to curb the rise of China's economy, especially after the White House sees the growing influence of the renminbi, and is worried that it will one day threaten the hegemony of the dollar.
As a result, various laws were enacted in an attempt to maintain the dollar's global influence while curbing the rise of the renminbi.
Judging from the current results, the Americans' attempts have failed, and the years-long currency war has not broken China, but has made the mainland's economy more resilient.
The economic decoupling between China and the United States has forced China's economy to become more independent, its dependence on foreign capital has been further reduced, and the influence of the renminbi in Asia and around the world has been further enhanced.
Although the US dollar indices are still at a relatively good level, in light of the actual economic situation in the United States, this so-called index presents nothing more than a "false prosperity".
Domestic inflation in the United States is currently high, reaching 3.5% in March this year, much higher than in other countries, and the government fiscal deficit is also increasing.
According to statistics, the U.S. government's fiscal deficit in 2023 alone will reach $1.7 trillion, an increase of 23% compared to previous years.
These two major problems, combined with the high unemployment rate in the United States, the shrinking industry, and so on, let us see clearly the real state of the current US economy: on the surface, it is still glamorous, but in fact it is full of holes and has lost its former glory.
The loosening of the hegemony of the US dollar and the increasing influence of the renminbi
The predicament faced by the US economy is also seen by all countries in the world, and the authority of the US dollar in the world has been invisibly weakened.
Capital markets around the world have begun to doubt the stability of the dollar, and many capitals have begun to turn their attention to the renminbi instead of the dollar as a primary liquidity option.
The reason why capital favors the renminbi more is naturally that compared with the dollar, the renminbi has shown more superiority in this protracted currency war.
In this currency war, thanks to the government's macroeconomic control and the resilience of the mainland economy, the domestic inflation rate has always remained at a relatively low level, which is in stark contrast to the United States on the other side of the ocean.
Countries around the world have seen the different performances of China and the United States in the currency war, and are impressed by the more stable performance of China's economy, and the renminbi, as the official currency of the mainland, is naturally regarded as a more stable currency than the US dollar.
The U.S. government is extremely angry at this situation, but it cannot find a reasonable way to deal with it, and can only maintain or even increase the various indices of the dollar through the government's forcible intervention, but this not only fails to fundamentally solve the problem of dollar stability, but even triggers a series of vicious chain reactions.
The first is the impact on the U.S. economy, which was forced to stabilize the U.S. dollar index by raising the exchange rate, with the consequence of leaving the U.S. economy in a bubble called "false prosperity."
In this bubble, the U.S. economy is ostensibly thriving, but in fact problems such as high debt and fiscal deficits still exist and even worsen. It is foreseeable that the inflation rate in the United States will remain high or even continue to increase in the future.
Then, on the international front, a false dollar index boom will not save the dollar from declining, because countries can see what is actually happening in the United States.
At the same time, the continued strengthening of the US dollar will deepen the economic turmoil in some countries and regions, and further strengthen the resistance of the people of all countries to the US dollar.
Just this month, the dollar index rose on bets of a rate cut by the Federal Reserve, while the rest of the world's currency indices fell to new lows. In Asia, currency indices such as the South Korean won, the Japanese yen, and the Indonesian rupiah have all fallen sharply, and have even triggered a sell-off frenzy everywhere.
In response to this situation, the central banks of Asian countries have begun to act and launched a "currency defense war" belonging to Asia.
At present, the outcome of this currency defense war has not yet been decided, but one thing is certain, that is, the United States has maliciously controlled the dollar index in an attempt to manipulate the financial market, which is to consume the confidence of people around the world in the dollar.
The unusually stable performance of the renminbi in the fluctuation of the U.S. dollar index this time has further strengthened the trust of the people of Asian countries in the renminbi.
In fact, if we look at the data, we can see that in the economic competition between China and the United States in recent years, the influence of the renminbi in the international community has been increasing.
In March this year, the renminbi's share of international payments reached nearly 70%, reaching a new high, ranking fourth in the world, and this number is growing. The share of RMB in the international trade finance market has also been increasing in recent years, and it has now reached the third place in the world.
By comparing the state of the U.S. and Chinese economies and the changes in the influence of their currencies around the world, we can at least assume that China has the upper hand in the currency war between the two countries so far.
epilogue
China is temporarily in the lead in the current currency war between China and the United States, but we must not take it lightly: the White House has done everything to suppress China's economy, and will certainly launch a new round of currency wars in the future to weaken the renminbi's influence in the world.
The US government should wake up as soon as possible that China's economic rise cannot be contained, that the Americans are no longer the dominant power in today's international financial market, and that the loosening of the hegemony of the US dollar is inevitable.
It is hoped that the United States will recognize the reality as soon as possible, strengthen economic cooperation with other countries, and refrain from doing things that harm others and itself.
Resources
Beijing Business Daily, 2024-04-16, report on "The US Dollar Strengthens and the Asian Currency Defense War Begins".
Finance Associated Press, 2024-04-15, on "Strong Dollar Opens "Harvest" Mode Again: Emerging Markets Launch a "Currency Defense War"!".
Guangming.com, 2024-04-22, on "Expert Interpretation: Over 300 Trillion Yuan!