The world’s financial dynamics are currently undergoing a transformative change. With each passing day, global financial policies are adapting to the evolving phase of the market, which includes letting regional currencies topple and surge, seek more value, and directly challenge the prestige of the US dollar. With countries like China and Russia actively making waves in the finance domain, the US dollar now has significant foes, ones that want to derail its reserve currency status and establish its own currency reputation. The growing China-ASEAN relations are adding more to the development, which may jeopardize USD in the long haul. Here’s how.
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ASEAN-China Relationship Grows Stronger
The Association of Southeast Asian Nations, or ASEAN, is emerging as one of the most influential economies in the world to interact with. The ten-nation bloc is progressing rapidly in all economic sectors and continues to invite heavy foreign investments to carve its own independent niche. Recently, ASEAN made its presence felt in the recent CAEXPO event. The ongoing program is enabling ASEAN to show its products to Chinese consumers, paving the way to develop diverse revenue channels for the bloc.
“ASEAN is a key strategic market for our company’s international business development. Additionally, advancing clean energy projects in ASEAN countries contributes to the region’s green and low-carbon development.” As shared by Song Hailiang, chairman of the company.
At the same time, both nations are leaving no stone unturned to robustify their economic alliances. While delivering opening remarks at the Expo, ASEAN’s Secretary-General, Dr. Kao Kim Hourn, shared how both entities are constantly devising ways to diversify their investments within the planned circuits.
Statistical Aspect
Hourn shared how trade between the two regions has reached a whopping $696 billion mark in 2023.
“Since the inaugural CAEXPO, trade and investment between ASEAN and China have expanded exponentially. Today, ASEAN and China stand as each other’s largest trading partners. With two-way trade surging nearly eightfold, from USD 89.2 billion in 2004 to USD 696.7 billion in 2023. according to ASEAN statistics. China accounts for nearly 20 percent of ASEAN’s total trade. Similarly, Chinese foreign direct investment (FDI) in ASEAN increased almost sevenfold, from USD1.2 billion to USD 17.3 billion. In the past two decades.”
In addition to this, Hourn further shared how both governments are constantly working on curating ways to build policies that may help boost the regional revenue prospects of ASEAN and Chinese regions.
“The governments of ASEAN and China have steadfastly pursued a robust and forward-looking economic integration agenda. To strengthen our trade and business ties. Two key initiatives stand out. First, the Regional Comprehensive Economic Partnership (RCEP) Agreement. The largest free trade agreement globally brings together 15 Asia-Pacific economies. It covers 30 percent of the world’s population and GDP. RCEP opens substantial opportunities for businesses, positioning ASEAN and Chinese entrepreneurs at the forefront of this economic integration.”
The integration, however, may bolster ASEAN’s presence in China and vice versa, which in alternate scenarios may impact the prestige of the US dollar. With the growing closeness of regions like ASEAN and Russia with China, the majority of the goods transactions may be weighed in local currencies or Yuan, impacting the demand for the US dollar in the long haul.
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Repercussions Of This Change: Impact On Dollar
Alliances like BRICS and ASEAN are already busy launching their own payment systems. While BRICS is working on curating its own independent currency, ASEAN, on the other hand, is vying for a local currency initiative to end its reliance on the US dollar.
In the middle of this, China is expediting efforts to internationalize the Yuan by letting the currency acquire a central place within the global transactions domain.
The decision of the former US president Donald Trump to levy a 100% tariff on countries moving away from the dollar may also expedite the dollar derailment process, with countries looking forward to exploring other currencies in search of alternatives. In the long haul, such practices may end up eroding the US dollar, straining its relationship with its global peers.
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