Published 01 May 2020
China surprised the world today and decided to cancel the dollar peg in the stock exchange transactions and decided to deal officially and the official link to the Chinese yuan instead of the dollar, and this is a bold and important step in China’s economic history.
This means that the dollar has become non-existent in Chinese trading and the US dollar will fall strongly against the Chinese yuan and may affect it in global markets. And all the global markets were stunned by the decision.
The news was discussed widely. It is an economic war that could lead the world to a devastating war that cannot be neglected if Americaacts foolishly in the face of this decision !! China 2021 will lead the world.
This is China’s old dream and what it planned to achieve for decades or more. China plans a separate digital currency e-RMB, to take on fights with $ .China starts major trial of state-run digital currency .
The explosive rally of digital currency-related stocks followed news that after several years of anticipation, China’s government released a timeline for rolling out its new digital currency in four cities.
In the next month, government workers in these cities will use a smartphone application to receive at least a portion of their paychecks in the form of a digital payment, marking a milestone on the path toward the world’s first digital currency system by a major central bank. The report says, the e-RMB has reportedly been adopted into the monetary systems of several cities.
Experts says, the digital currency could represent a serious threat to an American asset that has reigned unchallenged for decades: the U.S. dollar.
In recent months, China’s central bank has stepped up its development of the e-RMB, which is set to be the first digital currency operated by a major economy. It has reportedly begun trials in several cities, including Shenzhen, Suzhou, Chengdu, as well as a new area south of Beijing, Xiong’an, and areas that will host some of the events for the 2022 Beijing Winter Olympics.
Sina News said the currency would be used to subsidise transport in Suzhou, but in Xiong’an the trial primarily focused on food and retail. Some reports also claim businesses including McDonald’s and Starbucks have agreed to be part of the trial.
Digital payment platforms are already widespread in China including Alipay, owned by Alibaba’s Ant Financial, and WeChat Pay, owned by Tencent, but they do not replace existing currency.
“A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level,” last week’s China Daily report said.
“It may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption.”A decline in cash usage is expected to continue amid the growing popularity of digital payment platforms and as people avoid physical contact during the coronavirus pandemic.
A sovereign *digital currency provides a functional alternative to the dollar* settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level,” last week’s China Daily report said.
Some government employees and public servants to receive their salaries in the digital currency from May.
A decline in cash usage is expected to continue amid the growing popularity of digital payment platforms and as people avoid physical contact during the coronavirus pandemic.
U.S. dollars reign supreme in the global economy. Nearly 90 percent of international transactions in 2019 were in U.S. dollars, and about 60 percent of all foreign exchange reserves in the world are in U.S. dollars, compared with the Chinese yuan, which makes up only 2 percent of global payments and reserves.
However, the global financial system is in New York, where dollar-based payment systems process trillions in transactions, the U.S. government has global muscle in enforcing sanctions.
Because of that unique power, organizations like Iran’s Islamic Revolutionary Guard Corps and countries like North Korea feel the bite when they are sanctioned by Washington.
Another expert says, for decades, the governments of China, Russia and many others pushed hard to create an alternative reserve currency system. But none has had much success.
China’s currency is basically only being used in some Asian countries, and in some transactions, such as buying crude oil from Iran, because U.S. sanctions make it difficult for Iran to accept payments in dollars.
Experts pointed out that China’s proposed digital currency bypasses the Western banking system, including SWIFT, the Belgium-based Society for Worldwide Interbank Financial Telecommunication, that enables financial institutions worldwide to securely send and receive information about transactions.
It may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption.( SPOIndia )