In De-dollarization China Trusts

SPUTNIK NEWS / BATTLE FOR WORLD – October 11, 2018: The article highlights that the strong US dollar and expensive oil are serious issues for Asia. And that the increasing Federal Reserve System rates and the further strengthening dollar weaken developing economies’ national currencies, while energy resources, which are priced in US dollars, are becoming more expensive for exporting countries. A rise in asset prices makes the issue even tougher.

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Regardless of how severely Donald Trump rebuked China over manipulating the yuan rates to level out the negative consequences of the tariffs for exporters, the weakening of the Chinese currency, as well as of other developing countries, is directly linked to the US’ own actions, said the article.

Symmetric Moves?
The American economy is on a steady rise, along with Donald Trump recently introducing a tax reform which helped to free up additional capital. These are the conditions that could threaten with the economy overheating, and regulators naturally raise interest rates to avoid such negative effects. So as to battle the rates’ corrections, other countries have to symmetrically raise their interest rates, which is not always possible.

Oil Turmoil
Meanwhile, China, for instance, remains the biggest importer of energy resources, while their prices are denominated in US dollars, which, because of the weaker yuan, makes the energy resources for China more costly. Another example is India, where a vast part of the population is involved in agriculture. The strengthening of the US dollar leads to a surge in diesel prices, which is something Indian farmers are already complaining about. Even Russia experienced the effect: ruble rates with regard to the US dollar are too low, taking into account the current oil price tags, said the article.

De-dollarization Promises
The trouble is that for developing countries, the devaluation of national currencies carries as much risk as increase in interest rates, as both may halt economic growth. This is the reason why the term “de-dollarization” is increasingly gaining popularity now.

Even the EU is indignant over the fact that the world’s most essential resources are nominated in dollars. President of the European Commission Jean-Claude Juncker billed it “absurd that Europe pays for 80 per cent of its energy import bill — worth €300 billion a year — in US dollars when only roughly 2 per cent of our energy imports come from the United States.” “It is absurd that European companies buy European aircraft for dollars, not euros,” Juncker stated.

he Financial Strategy Center at the Social Sciences Academy Zhang Ning told Sputnik China: “China’s State management for currency control has found that citizens are permitted to annually buy currencies worth no more than 50,000 US dollars, and this applies to purchases of any foreign currency.

So, all currency operations are automatically denominated in dollars, thereby reinforcing its status. Why not, for instance, denominate these currency limitations in yuans? Say, one would be permitted to purchase currencies not for a maximum of 50,000 US dollars, but for 350,000 yuans?”

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De-Dollarization: World Tired Of Funding US Military Adventurism

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