Two experts who spoke to “Sky News Arabia” agreed that the yuan has become a more trusted source than the dollar for many countries around the world, the most recent of which is Argentina, which announced a a few days the use of local currencies. in exchange with China.
The two players are watching what gains countries expect from using the yuan, as well as what’s preventing it from hitting the same level with the dollar soon.
For more than 10 years, Beijing has reduced its dependence on the dollar, pushed by the risks associated with the link with the American economy, and it appeared in the global financial crisis in 2008, according to a report by the newspaper “The Guardian”.
In recent months, Beijing has accelerated its moves, having followed the gathering of NATO countries in the “era” of Russia’s sanctions, after the outbreak of the 2022 Ukraine war, taking advantage of the connection of its dealings with the financial system in the United States. States and Europe. China’s motivation to decouple its economy from the dollar grew after the Taiwan crisis emerged and the possibility of a confrontation with Washington, followed by the imposition of sanctions against it as well. Recently, agreements have been reached between China and several countries to exchange local currency exchanges, including India, Brazil, Russia and Argentina. Last March, a Chinese company used the yuan to purchase 65,000 tons of LNG from a French multinational, the first time the yuan was used in an international LNG deal.
Shield against sanctions
International business expert Jasser Matar expects the “internationalization of the yuan” to lift China to the top of the markets, especially with the trend of many countries to exchange their trade with China in the local currency . Due to its lack of confidence in the dollar, which Washington uses to impose sanctions.
This is further encouraged by the gains awaiting China and the countries that trade with it in yuan, including, according to Matar:
Chinese products have supplanted American and European products in the market. Chinese products are cheap and Beijing has sought to improve its quality to eliminate its reputation for poor quality. Now there is a great dependence on these products, so China’s trade with the world has jumped to a trillion dollars a year. Countries that adopt the yuan, their economies become more powerful in light of China supplying what is needed away from the US market. The yuan will overtake the dollar, and in April it overtook the dollar for the first time in China’s foreign payments, and now more than 72 central banks are adopting the yuan in their transactions.
Crisis against the yuan
However, the path of the yuan is not 100% open, because one of the largest economic activities in the world, which is energy, is linked to buying and selling in most cases with the dollar, hard to decipher now, as Matar warns.
To overcome this hurdle, he says China “needs to be a huge oil power to sell its oil in yuan, and also needs more time to extend its strings inside countries to buy oil from it. in yuan”.
In this regard, economic analyst Aref Hassan adds: “China cannot claim to be a superpower if it continues to rely on the dollar to set the price of its products.
At the same time, he pointed out that the tendency of several countries to use the yuan is a recognition that China has become a “reliable economic and political force”, expecting it to be a great support for China in the event. of conflict. in Taiwan and the imposition of sanctions against it.
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