Challenge To Dollar Supremacy: A statement by Russian President Vladimir Putin in which he said that Russia will now use the Chinese yuan instead of the dollar for trade with Asia, Africa, and Latin America. Supports and all this happened when Chinese President Xi Jinping was on a tour of Russia. But why have many countries around the world started looking for an alternative to the dollar for trade? What are the reasons due to which efforts are being made to reduce the dominance of dollar?
Russia is one of the world’s largest oil, coal, and gas producing countries and the way economic sanctions were imposed on it, it has affected not only Russia but also other countries doing business with it. Russia was thrown out of the SWIFT system by America and other western countries. This is the system through which one country does its transactions with another country and its transactions are mostly done in dollars and this is the reason why America has been doing its arbitrariness on the countries doing transactions with this system.
Let us tell you that before Russia, America had thrown Iran out of this system in 2012 due to Iran’s nuclear program, due to which Iran could not get the payment for the countries to which it had sold oil and Iran’s economy collapsed.
Exercise to reduce the effect of dollar
By the way Russia had already taken steps towards de-dollarization. ‘De-Dollarization’ Which means reducing the effect of dollar in the international market. In 2014, when strict sanctions were imposed on it for the occupation of Crimea, Russia started looking for an alternative to the dollar. By the year 2021, Russia had reduced its share in dollar-linked assets to about 16%. Bypassing SWIFT, Russia has SPFS i.e. System for Transfer of Financial Messages and China is moving fast towards transacting through CIPS Cross-Border Interbank Payment System. So far 690 banks have joined this payment system of China, which clearly shows that countries around the world have accepted that trading only in dollars is no longer completely safe.
You will remember that even after the ban on Russia, India did not stop doing business with Russia. After which many countries including America had raised strong objections to it. The answer to which Foreign Minister Jaishankar made it clear by going to many forums of the world that India’s responsibility is towards its citizens and it will not back down from it. After the SWIFT system ban, India traded with Russia in Rupee-Ruble. This gives a clear indication that if the Rupee-Yuan or Rupee-Ruble transaction mechanism is successful, then there is no doubt that in the coming times, other countries will also move rapidly towards this.
Let us tell you that Saudi Arabia has agreed to take oil payment from China in Yuan, this will be the first time in 48 years when Saudi Arabia will trade in another currency instead of dollar. Along with this, the United Arab Emirates has agreed for transactions in rupees from India. To reduce the effect of dollar, China is also trying to persuade ASEAN, Africa and Latin America countries to do their trade in yuan instead of dollar. India is already working with Russia to increase trade in ruble. The use of the US dollar in Russia’s exports to BRICS has declined from nearly 95% in 2013 to less than 10% in 2020. Russia has also put pressure on western countries to pay in ruble instead of dollar for gas supply…….. Apart from this, Brazil and Argentina have agreed on common currency trade for the two largest economies of South America. has expressed. At a conference in Singapore, several Southeast Asian officials discussed de-dollarization.
Russia is giving its full support to trade in Yuan, along with this, China, which accounts for 15 percent of the world’s GDP, is the world’s largest manufacturing country and the largest exporter, due to which it openly uses the US dollar. But challenging. IMF has already included Yuan in its Special Drawing Rights- SDR basket in the year 2016. Today, China is a major trade partner with 125 countries of the world and all of them trade in Yuan, along with this, to replace the dollar, China will have to increase its trust in other countries of the world. A strong monetary policy system like dollar has to be built. Day by day increasing its trading partners and persuading them to trade in yuan only due to which the possibility that yuan can be an alternative to dollar has intensified.
Can the Yuan replace the Dollar?
At present, America has the most secure financial market, apart from this there is also transparency of dollar. Dollar being a stable currency for a long time, the trust is intact but when it comes to Chinese Yuan becoming a global currency, the first question that arises is China continually interfering in the borders of other countries, undeclared Hitlerite rule , And due to the constant attempt to trap the weak countries in their trap, it seems difficult to trust this country. Along with this, Yuan has already been devalued. The control of this currency is in the hands of CCP, the ruling party of China, due to which there are many challenges in the way of one Chinese Yuan becoming a global currency.
Along with this, it is also clear that until the dollar does not get a tough challenge from other currency, America will continue to do its arbitrary on other countries. And with the changing times, if America does not change its attitude, then its currency dominance may face the biggest challenge in future.
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