As the saying goes, a leaf knows autumn, and the cicada noise forest is quiet. The recent changes in the international financial market are reminiscent of the vigorous subprime mortgage crisis 15 years ago. Although many people thought that the crisis came unexpectedly, in fact, there were already clues as early as 07. This reminds people of the old saying: "Disaster does not go alone".
Now, the world economy in 2024 seems to be shrouded in the shadow of a financial crisis once again. The U.S. banking sector is in turmoil, the currencies of many Asian countries have shrunk sharply, and even Japan, which has always been known for its stability, cannot escape the doom of falling stocks and bonds. Could this be an indication that an even more ferocious economic storm than in '08 is coming? As the world's second largest economy, will China be able to cope with the US financial "draw-from-the-bottom of the kettle"? In the face of a potential crisis, how should we take precautions and turn the danger into a disaster? Let us analyze and analyze it together.
This global financial turmoil is staggering and menacing. The yen has fallen to its lowest level in 34 years, and many currencies such as the Vietnamese dong and the Indonesian rupiah have also been in a hurry. The United States, once the "locomotive of the world economy", is now thundering in the banking industry.
U.S. Treasury Secretary Janet Yellen and Secretary of State Antony Blinken's recent intensive visits to China have been as frequent as a drop in the bucket, highlighting the fact that the U.S. economy is under far greater pressure than expected. On the surface, the US economy is prosperous and peaceful, but in fact, it has long been riddled with holes and crises.
So far, the size of the U.S. Treasury bond is as high as 34.5 trillion U.S. dollars, and about 1.7 trillion U.S. dollars of Treasury bonds were issued last year alone, with interest rates as high as about 5%. Unlike the "sweet" debts of the past, which were low interest rates, these high-interest debts are tantamount to a blood-sucking tube stuck in the US economy, and the heavy debt burden is no longer comparable to what it used to be.
Why, then, is there so much talk of the US debt crisis and the collapse of the US economy, but the United States has not yet shown its "original form"? This is because the United States has been changing its methods of printing money and issuing bonds and wantonly squeezing the financial resources of Japan and Europe. In Japan, the yen has fallen from 103 to about 158 against the dollar in recent years, and the country's wealth has shrunk by more than half. Even so, Japan is still riveting its efforts to buy U.S. bonds, for fear that the father of the American financier will not be able to breathe.
The United States also used the so-called emission reduction bill to force German car companies and Asian technology giants to invest in the United States to "pay tribute" to the United States, in disguised blood transfusion for themselves. But these little tricks are like a drop in the bucket for the mired US economy.
Signs of further contagion are already emerging: the US banking sector is concentrating, from community banks in New York to Silicon Valley Bank in San Francisco. The size of the Fed's reverse repo operation has plummeted from a peak of $2.3 trillion to about $400 billion. The hegemony of the dollar is teetering, and global confidence in the dollar is eroding.
The United States itself is not protected, let alone the weak developing economies. Many Asian countries have been forced to fight currency wars, and Indonesia has to sell its core assets to support its currency. Emerging economies such as Vietnam and India are already in the wind and are on the verge of collapse. Even developed countries such as South Korea and Japan are in trouble, and the market is constantly being short-sighted.
It can be said that the world economy in 2024 is at a critical crossroads. Global economic growth is sluggish, scientific and technological innovation is hindered, and geopolitical wrestling and resource competition between major countries are becoming increasingly fierce. Since '08, the United States has been printing money to expand its balance sheet and creating a financial bubble to prosper, but the re-inflated bubble will eventually burst. Now, the United States is tightening liquidity by raising interest rates, trying to detonate the global debt crisis, profiting from the mess and leaving itself alone. This life-and-death gamble has kicked off around the world.
In the face of the looming economic winter, how should China choose? Should it be beaten passively by clinging to its defects, or should it take the initiative to seek change and turn danger into a disaster? For China, this crisis is both a challenge and a rare historic opportunity. We need to take advantage of the situation, take offense as defense, and use the US interest rate hike as a forcing mechanism for RMB internationalization and financial market reform, promote RMB cross-border settlement, and "dredge the meridians" for RMB export channels.
You must know that under the shadow of the hegemony of the US dollar, which country dares to "rebel" easily? However, the current economic predicament has provided an opportunity for the rise of the renminbi. For many countries, reducing their dependence on the dollar and embracing the renminbi may be the wisest choice right now. Therefore, we need to seize the favorable opportunity of shaking the credibility of the US dollar to accelerate the internationalization of the renminbi and let the renminbi play a greater role in the global trade and financial system.
Of course, we should neither take the United States and Western financial forces lightly, nor be too pessimistic about the economic situation. As the world's largest trading country, the internationalization of the renminbi is full of difficulties, and we need to assess the situation and take action step by step. We should be more vigilant against the risk of the US economy "blowing itself up", and if the US defaults on its debts, the global economy will suffer.
Overall, the economic situation in 2024 can be described as two days of ice and fire. The crisis is a test of the wisdom and determination of every country. I believe that as long as all countries work hand in hand, uphold the vision of a community with a shared future for mankind, and adhere to win-win cooperation, we will be able to overcome the difficulties together, and bring the global economy out of the "reef" and back to the broad road of prosperity and development. As a responsible major country, China is ready to work side by side with other countries to contribute to stabilizing the international financial order and building a fair and reasonable world economic governance system.