JPMorgan: China May Move Ahead of U.S. in 2030, But Dollar Will Dominate

Paigambar Mohan Raj
Source: The Japan Times

According to the Centre for Economics and Business Research (CEBR), one of the UK’s leading economics consultancies, China will become the number one economy in the world by 2030. However, according to analysts from JPMorgan, even if China becomes the largest economy, the U.S. Dollar will not lose its reserve standard immediately. The bank cited historical data and said that any change would be gradual.

In the second half of the 19th century, the United States overtook Great Britain as the largest economy. However, the dollar only surpassed the pound as the world’s reserve currency by the end of World War II. Therefore, historical precedent highlighted that dollar supremacy may endure even into the second half of the 21st century if China surpasses the U.S. as the largest economy around 2030.

Is China the only threat to the US dollar’s domination?

As per JPMorgan, China is the only nation that might overtake the dollar and the American economy. The strategists at JPMorgan, however, think that this might not occur. The bank cited the benefits of the U.S. in terms of economy, technology, demographics, and geography. Additionally, China’s ability to loosen capital controls will determine how much the Chinese Yuan can grow.

The JPMorgan analysts did, however, reiterate the prospect of a slow de-dollarization. Either declining confidence in the dollar or encouraging developments elsewhere could hasten the process. Many countries have openly expressed interest to move away from the dollar and begin trading in regional currencies or use China’s yuan.

Some think the Chinese yuan will take the place of the U.S. dollar as the world’s reserve currency. According to the chairman of Russia’s second-largest bank, the yuan will overtake the dollar as the reserve currency in the “next decade.”

Former Managing Director of Morgan Stanley and Economist, Stephen Jen predicted that the globe will transition from a unipolar reserve currency world to a multipolar world. The Chinese yuan, the euro, and the U.S. dollar would establish a “tripolar” reserve currency configuration. Nonetheless, a common idea among them is that the dollar will not be the lone dominant currency. Either it will have fellow currencies, or it will be displaced.