China and Russia may be working towards a new gold-backed currency, aiming to displace the dollar as the world’s leading reserve currency, but such a currency will meet that goal. is unlikely to.
” USD is still the safest and most convenient Today, it is the most widely used currency in Asia and the world,” Min-Hua Chiang, a research fellow and economist at the Heritage Foundation’s Center for Asian Studies, told FOX Business. And that is unlikely to change in the near future. “
Neither country has officially confirmed plans for such a currency, but earlier this year China began buying large amounts of gold, while at the same time Russia began decommissioning the dollar for sanctions in response to its invasion of Ukraine. Separated. War also Big discount on gold price in a year.
Some experts say these moves, in addition to the closer ties that have developed between Moscow and Beijing as the rest of the world isolated Russia after the invasion, are partly due to China’s decision to launch a gold-backed new currency. It warns that it may be trying to launch a
The idea of a joint Russian-Chinese currency has surfaced regularly over the past decade, especially since the Central Bank of Russia opened its first overseas office in Beijing in 2017.
For 20 years, China’s leaders have Reforming the global financial system weaken the dominance of the dollar.
“Two components of that strategy center around the development of a Yuan-based global commodity trading system and efforts by China. in partnership with Russia We will challenge the dominance of the dollar by creating a new reserve currency,” Singleton told Fox News Digital.
“Essentially, Beijing and Russia are trying to build their own spheres of influence and monetary units within them, effectively shielding themselves from the threat of US sanctions,” he added.
But the record amount of gold bought by China has raised some eyebrows, and it tends to be under the radar of mainstream media, according to Reuters, at about $4.6 billion, bought in June. It is more than double the 32.5 tonnes and the second highest monthly total since 2012.
According to March 2022 international financial statistics, China has the 7th largest number of gold stores, with more being added each month.
Trading expert Frances Hunt told Asia Markets that backing a currency with gold is the best way to build trust in that currency. That currency may be digital Essentially, to allow China more scrutiny of its citizens’ activities.
But Chen downplayed the potential success of the new currency, citing “relatively small transaction volumes” that limit the growth of the new currency and the difficulty of promoting digital currencies.
“Even if the two countries used new currencies for bilateral trade transactions, the impact on the US dollar would be limited due to the relatively low volume of trade,” Chen argued, adding that multinational currencies such as the euro to “political and economic coordination and integration that does not exist in Asia today.”
“The appeal will be limited,” Chen said. “Considering that in August 2022, 43% of global payments were made in US dollars, and he then 34% in euros. accounting for just 2% of
“The renminbi has some support, but still lags far behind the US dollar and the euro,” she concluded, noting that “foreign confidence (or lack thereof) in China and Russia’s economic prospects is , is an important limitation for a potential communal currency,” he added. .