As the saying goes, "if you borrow hundred dollars from the bank, you got a problem, if you borrow a billion dollars from the bank, the bank got a problem".
In the world today, China got a problem. They lent trillions of dollars to the US. Furthermore, the US used a large part of this money to build weapons to point at China. Needless to say, China is not happy. However, there is not much else that China can do with its reserves. With populism on the rise, it's becoming increasingly clear that foreign debt cannot be trusted. Much of it will either be inflated away or defaulted on.
Additionally, China has ambitions of becoming the dominant economic and military power of the world. Lending money to hostile foreigners unwilling or unable to pay will not lead China to world domination. What is required is a sustained build up of military power, combined with a strong currency.
With wars being horrendously expensive to wage, military might should be wielded as a threatening stick. War should only be waged when all other options fail. Economic might is by far the best way to gain dominance. Not only does this make politicians powerful, it makes the populace prosperous and therefore unlikely to topple the status quo. It is a win win path to domination.
China's main strategic goal today is likely to be economic rather than military. China is almost certainly aiming to dethrone the dollar as the world reserve currency. To do this, they need to make the Chinese yuan more desirable than the dollar. They need to give it a quality that the dollar doesn't have.
The yuan will not replace the dollar before it has all the qualities of the dollar, and something more. The Chinese have therefore implemented some changes to bring it up to par with the dollar. They have opened an oil exchange that trades in yuan, and they have opened a gold exchange that trades in yuan. Other commodities are also traded in yuan.
The next step will be aimed towards making the yuan better than the dollar. The gold analyst Alasdair Macleod thinks that China will aim to have their currency backed by more gold than the dollar. Neither the dollar nor the yuan is today directly linked to god. However, both the Chinese and US allow for people to freely buy gold. There is an indirect link between gold and these currencies.
If China can amass more gold than the US, then the yuan will fall less relative to gold than the dollar when the next currency crisis strikes.
In this perspective, it is interesting to note that the yuan has recently been pegged to gold rather than the dollar. China has also started to announce increases in their gold holdings. This adds up to a managed transition away from the dollar and over to gold. The yuan will be brought in line with the gold price in such a way that every yuan is backed by a substantial amount of gold. Assuming that China has already amassed a large amount of gold, the yuan needs only a small devaluation against gold in order to be considered as good as gold. This cannot be said of the dollar.
When the next currency crisis hits, the dollar will see massive depreciation relative to gold. The yuan is likely to fare much better, and as a result, people will start preferring the yuan over the dollar in international trade. The yuan will become the new reserve currency.
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