China and Russia, the United States' Strong Hegemony is the 'Dollar'

Increase Local Currency Payments Including Yuan in China-Russia Trade
China Resists Dollar Hegemony...Explores Expanding Digital Currency Payments

[Asia Economy Beijing=Special Correspondent Jo Young-shin] It is reported that the foreign ministers of China and Russia agreed on the need to break away from the dollar-centered international payment system to escape the risks posed by the United States. They view the strong hegemony of the U.S. as stemming from the dollar, a tight currency, and suggest using the local currencies of the transaction parties for international settlements. This is interpreted as a resistance and challenge to dollar hegemony.

According to Chinese media such as Xinhua News Agency and Global Times on the 23rd, Sergey Lavrov, Russian Foreign Minister, who visited China for a one-night, two-day schedule the previous day, discussed international and regional issues including the U.S., Iran, Afghanistan, and Myanmar with Wang Yi, Chinese State Councilor and Foreign Minister.

The two ministers are also reported to have agreed to further strengthen strategic solidarity to check the U.S., including against interference in internal affairs. Minister Lavrov particularly emphasized that the U.S. controls the international community through the dollar.

Regarding this, Chinese media claimed that the main topic of this meeting was how to respond to the U.S. and argued that ways to gradually break away from dollar hegemony must be sought.

Yang Jin, a research fellow at the Russian and Eastern European Research Institute of the Chinese Academy of Social Sciences, pointed out, "The whole world experienced the risks caused by excessive dependence on the U.S. dollar during the 2008 global financial crisis," adding, "Recently, concerns have grown again due to the large-scale quantitative easing measures implemented by the U.S. to stimulate its economy."

Dong Dengxin, director of the Finance and Securities Research Institute at Wuhan University of Science and Technology, stated, "The U.S. controls the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and arbitrarily sanctions several countries," and argued, "China and Russia must cooperate to counter dollar hegemony and establish a new payment system that can bypass SWIFT." He added, "Neither the yuan nor the ruble can challenge the U.S. dollar, but if a new payment system is established, at least unilateral U.S. sanctions can be avoided."

The Global Times reported that due to efforts by China and Russia, the share of U.S. dollar settlements in transactions between the two countries fell from 90% in 2015 to 46% in the first quarter of last year. It also reported that with the recent strengthening of the yuan and euro, the global dollar transaction share dropped by 2.55 percentage points from 40.81% in the previous year to 38.26% in January. Instead, the euro's share rose by 3 percentage points to 36.6%, and the yuan's share increased by 0.77 percentage points to 2.42%.

The mention by China and Russia of the need to establish a new payment system is also analyzed as considering digital currencies (CBDC). The Chinese government is exploring ways to expand digital yuan payment transactions with countries participating in the Belt and Road Initiative (land and maritime Silk Road).

Xinhua News Agency reported the day before in an article titled "China's Digital Currency Era Enters the Final Countdown" that the discussion should focus not on whether to use but on when to use it.

Xinhua quoted Myron Scholes, a professor at Stanford University, and Dan Schulman, chairman of PayPal, who attended the China Development Forum held on the 20th, saying that while about 60 countries are currently researching digital currencies, China is the most advanced, and digital currencies will help improve the financial soundness of the global economy and multinational corporations.

This content was produced with the assistance of AI translation services.