The US dollar remains unfazed by the rising antics of multipolar currencies. However, that does not change the fact that the American currency is still knee-deep in trouble and may always invite conflicts from the rising arena of local currencies that are ready to challenge its prestige and supremacy.
While the Chinese Yuan may have leveled down its progressive approach to toppling the USD, the Chinese currency remains steadfast on its path to establishing dominance in the currency vertical. Here’s how the Chinese Yuan can still counter the US dollar and emerge victorious on all economic fronts.
Also Read: US Dollar Hammers Chinese Yuan, Indian Rupee & Japanese Yen
Reasons That Can Help the Chinese Yuan Topple the US Dollar
1: Global Economic Shift
Gone are the days when the world would holistically bow down to the American dollar’s prestige and reputation. With the multipolar currency narrative in circulation, the competition to beat the USD as the world’s top currency has been catching pace with each passing day. Yuan has steadily intensified calls to bulldoze the US dollar by cutting its reliability on the American currency. With China joining hands with Russia and associated BRICS nations, the nation is projecting a stark power dynamic, threatening the US’s decades-old political and economic legacy.
2: Ongoing Currency & Trade Tensions
The US has reportedly held multiple talks to impose sanctions on certain Chinese banks that have been aiding Russia by disseminating financial help. On the other hand, Russia and China are spearheading $260 billion worth of trade proceedings without using the US dollar. If the US levies sanctions on China, the consequences could wreak havoc for the US, as it could end up severely jeopardizing the economic health of the nation.
“The US would be creating a gargantuan source of financial instability for not only China but also itself,” said Brian Wong, a fellow at the Centre on Contemporary China and the World at the University of Hong Kong.”
With China and Russia ditching the US dollar, the currency narratives are now shifting towards Yuan and Ruble, where Yuan seems to be gaining steady market momentum with continuous adaptation and integration with other nations and markets.
3: Geopolitical Turmoil
One of the primary reasons why the Yuan may gain a superior status over the USD is its ability to integrate with multiple economic spheres during times of crisis.
Also Read: US Dollar Fails to Surpass Nigerian Naira Despite Outpacing Yuan & Yen
As geopolitical tensions escalate between Russia and Ukraine, Russia has been actively making use of the Yuan to navigate the sanctions imposed on the US, doubling down on pressure on the USD.
“It appears that other emerging countries are also using the yuan when importing Russian crude oil,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute.