This was a predictable outcome. Cutting off SWIFT access forced Russia to CIPS. Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally.
https://en.wikipedia.org/wiki/Renminbi#Managed_float
https://en.wikipedia.org/wiki/Renminbi_currency_value#Intern...
https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechani...
Further the rules for whether you can or how much you can repatriate the proceeds from this bonds changes ~yearly at the whim of an opaque bureaucracy and they are very new instruments comparatively.
All that’s to say the yuan needs to be liberalized or companies have to invent new finance operations before China takes over the finance sphere. That doesn’t happen fast.
https://www.theguardian.com/business/2019/apr/17/deutsche-ba...
If the population was educated enough to know they were being stolen from, ‘Office Space’-style, they would throw their leaders out.
This is one reason the great firewall of China is so important, and I expect Russia to embrace that umbrella soon.
I don't think the Chinese are subsidizing the world for no reason; and I don't think they are the smartest person in the room either.
This is basically the same argument used by cryptobros and libertarians to criticize inflation.
I think there are pretty obvious tradeoffs with letting your currency amass purchasing power: probably it would shrink the amount of exports (which means that a lot of people might find themselves without a job) and it would make it harder to get a mortgage.
How do you propose that these negative effects would be mitigated?
Who from "the West" is going to consider major investments in China now? If by some miracle you manage to keep your IP secure, you risk losing your entire investment if/when the world gets tired of their support for the facists in Russia.
[edit] since I wrote this comment....
Who? Those who want to make money.
But everyone is showing their hands now.
And at the moment, it sure looks like China is supporting a dictator on the march to a major war. Trillion dollar funds are writing off their Russian investments at the moment. How long before China is seen in the same way?
People have been saying this for more than 10 years. As long as interest rates remain low and China continues to grow, there will be plenty of western money flowing in.
double-digit growth is great until it ends in zero.
Meanwhile in China, inflation is less than 1.5%, interest for money market fund is 2.4%.
You earn risk-free 0.9% if you hold them in CNY. You lose 7% if you hold them in USD.
Your choice now?
This is false, you are exposed to risk in changes in foreign exchange rates.
The yuan is pegged to the dollar, so it has the same exposure to fluctuations in fx that the dollar has. (Not to mention the fact that the Chinese government periodically adjusts its exchange rates)
1 year? 5 years? 10?
Your comment amounts to “yuan appreciation against the dollar is a sure thing”. Which in finance seems like a suspect statement.
This was an unstated policy goal. Russia as a regional power is provably dangerous. As a Chinese vassal, at least it’s contained.
Add to that the significant costs to the American economy dollar hegemony has brought [1], and this is broadly a win-win-win.
[1] https://www.wsj.com/amp/articles/how-the-reserve-dollar-harm...
I don’t see how this is any different than what the US has already done. The US has now cut off Iran and Russia from SWIFT in political moves. Any nation state is likely already doing the calculus.
Russian bank -> disposable temporary bank -> permanent chinese bank
That way the disposable temporary bank is the one that's blacklisted, while the permanent one never did business with the sanctioned entity (directly).
No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people). Typically there's no actual argument presented, just a statement that of course xyz will happen now, finally. You'll see that throughout the Russia war threads (here or elsewhere). Throughout my lifetime I've seen it repeatedly claimed: well of course, now the USD global reserve standard will begin to decline (the Euro was supposed to severely damage it; whoops).
The vast majority of the world isn't going to have a strong interest in holding Yuan and that'll define the global reserve status. There are no other major competitors to the USD other than potentially the Yuan, and it's not a serious competitor because of the nature of the CCP. As it is, the Yuan has a smaller presence globally than the Yen and that says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).
Yeah. I really wonder about this: The Chinese are doing everything possible to undermine their Yuan as a reserve currency. You can't freely move money. You can't open a Yuan denominated bank account easily. Their cards are hard to get/use (although some places are opening up). They didn't make a Stripe/Processing equivalent and open it to the rest of the world. You can't incorporate a Chinese company online and opening a Chinese company is a ridiculous process. English is still not widely used.
And has anybody checked the ICBC online-banking solution? These guys are still living in the 90s?
Most people think China is advanced in payments because they have wepay. But they seem to have just that and everything else (under State control) is still in the Soviet Era.
There is a decent argument for dollar hegemony hurting America [1]. China has no need to pursue reserve status for the yuan.
[1] https://www.wsj.com/amp/articles/how-the-reserve-dollar-harm...
My personal tipoff is how quickly someone mentions "petrodollar".
No, idiot, countries don't use the US dollar to buy and sell oil because the US military points a gun at them. They use the dollar because they, their trading partners, and everyone else prefer having dollars to rubles, renminbi, or bolivars.