A monetary revolution sweeping the world
I have been following the general trend of this financial market for a while now, and a very interesting thing happened. Did you know that just recently, the world's major economies have cut interest rates, which has really hit the "high-interest rate coalition" led by the United States?
This wave of rate cuts started in the small pockets of Switzerland and Sweden, but then it has been very popular, and even Canada, a major G7 country, has joined the group. You see, this is undoubtedly a resounding warning to the United States, that is, to tell the United States that your hegemonic position is already in jeopardy.
Next, the European Central Bank (ECB) announced a 25 basis point rate cut on June 6, which was a slap in the face to the United States on the global financial stage. In the past few years, many developed countries have desperately followed the US interest rate hike with the aim of building an indestructible financial alliance to curb China's liquidity on the one hand, and to drain the funds of other developing countries around the world in this way.
But now it seems that this set no longer works. When the world's major economies began to cut interest rates, large sums of money that had been hoarded in the hands of the United States and its allies began to flee from there and flow back into the market. This is undoubtedly a big positive for those countries that are still struggling with high interest rates.
What is even more interesting is that even the Saudi side suddenly announced that it would not renew the famous "petrodollar agreement" signed with the United States. Since its inception in 1974, the agreement has been an important pillar of the dollar's dominance as a global currency. Saudi Arabia's doing so has undoubtedly dealt a heavy blow to the dollar.
There are two main reasons why Saudi Arabia is doing this: first, because it sees that China is rising and has become Saudi Arabia's largest oil export market, and the US dollar as the only settlement tool can no longer meet Saudi Arabia's needs; Second, seeing the increasing influence of the RMB on a global scale, Saudi Arabia began to consider using RMB for trade settlement.
On June 12, Russia's National Day, the U.S. Treasury Department suddenly announced a new round of sanctions against Russia, which covered a staggering scope. This is undoubtedly the United States' desire to continue to push Russia into a corner, but as a result, Russia was obviously prepared, and the next day it announced that it would completely abandon the dollar and the euro on the Moscow Exchange, and would no longer even use these two dominant currencies for stock and derivatives trading.
What does that mean? This is undoubtedly Russia's declaration to the world that it is ready to completely break away from dependence on the dollar and the euro and look for a new reserve currency. In this case, the renminbi has undoubtedly become the most potential alternative.
In general, this series of events, without exception, is shaking the dominance of the dollar in global financial markets. These successive measures taken by Canada, Europe, Saudi Arabia, Russia and other countries can be said to have set off a vigorous change on the global financial stage. This undercurrent hidden in the deep financial landscape is quietly changing the pattern of the whole world.
This is a great opportunity for China. Over the past few decades, the U.S. dollar has dominated global financial markets, with few non-U.S. currencies to choose from other than the renminbi. But now, with the rise of a series of currencies such as the euro and the ruble, the choice of the global currency market has been greatly expanded, which has largely accelerated the process of "de-dollarization".
Against this backdrop, the international status of the renminbi has also ushered in an unprecedented upward opportunity. As the world's second largest economy, China's comprehensive national strength continues to grow, providing a solid foundation for the internationalization of the RMB. At the same time, the Chinese government has been steadily promoting the internationalization of the renminbi, whether through the AIIB or the Belt and Road Initiative.
Even more exciting is the urgent need to find a new reserve currency after Russia completely abandoned the dollar and the euro. In this case, the renminbi has undoubtedly become the most potential alternative. Once Russia adopts the renminbi on a large scale, it will certainly help the renminbi climb to a higher position on the global stage, and its influence will also be greatly enhanced.
This is undoubtedly a win-win situation for China. On the one hand, the internationalization process of RMB will usher in rapid development, and on the other hand, it also means that China will have more initiative and voice in the future international financial landscape.
Of course, in order to truly achieve the full internationalization of the RMB, China also needs to further optimize relevant policies, continue to improve the liquidity and settlement convenience of the RMB, and more countries and enterprises are willing to use the RMB for transactions. At the same time, we will continue to consolidate our position in the global industrial and supply chains, and continuously improve the international recognition and use of RMB.
Only in this way can the renminbi truly become a veritable "world currency" and thus occupy a pivotal position in the future global financial order. For China, this is undoubtedly a strategically important opportunity that deserves to be fully grasped.
Do you think there is any deep significance to this wave of global interest rate cuts and the abandonment of the dollar by the countries involved? I think there is a deeper problem behind this, which is that the global monetary system is undergoing an unprecedented reshuffle and reshaping.
As we all know, the dollar has always dominated the global financial markets, thanks in large part to the famous "petrodollar" agreement of the 70s of the 20th century. Through this agreement, the U.S. dollar was established as the sole settlement currency for global oil trade, thus further cementing its supremacy.
But times have changed, and today's international landscape has undergone earth-shaking changes. As the world's second largest economy, China's influence is growing, and the renminbi's position in global trade is becoming more and more important. At the same time, other major economies, such as Russia and the European Union, are actively seeking to wean themselves off the dollar and try to build a more diversified and stable global monetary system.
You see, the global currency market is turbulent at the moment. The dollar's dominant position in the international financial arena is shaking, and many countries have jumped out to seek "de-dollarization", which undoubtedly marks the beginning of a new era of currency competition.
The outcome of this currency "war" will directly determine the direction of the future global financial order. If the U.S. dollar eventually loses the support of the global financial market, it will inevitably lead to the restructuring of the entire Sino-US financial relationship and even the global financial structure. Against this backdrop, the renminbi will undoubtedly become one of the strongest contenders.
In fact, the underlying logic behind this currency game is far from being a simple financial issue, but a wrestling with national strength, geopolitics and even the entire world order. As the dominant currency in the world today, the US dollar contains not only economic factors, but also deep political, military and ideological factors.
And when these factors are shaken, it is bound to trigger a more extensive and profound chain reaction. As I mentioned earlier, behind the Saudi agreement to abandon the dollar is a subtle change in the geopolitical landscape of the Middle East. By the same token, Russia's massive abandonment of the dollar and euro may not be motivated solely by economic considerations.
In general, the core of this global currency game is the reshuffling of the balance of power among countries. The U.S. dollar's status as the world's hegemonic currency is facing unprecedented challenges. In this "Warring States Era", the renminbi will undoubtedly become one of the most powerful competitors, and its international influence will be further enhanced.
This transformation has undoubtedly brought unprecedented opportunities to China. However, it will take a long and tortuous process to make the renminbi truly a "world currency". China needs to further deepen its financial reforms, optimize the liquidity of the renminbi and the environment for its international use, and at the same time continuously improve its comprehensive national strength. Only in this way can the renminbi truly take its rightful place in the future global monetary system.
And for us ordinary people, the final result of this monetary revolution will also have a profound impact on our lives. After all, the stability of the monetary system has a direct bearing on the healthy development of the national economy. So I think it's important to keep a close eye on this series of interesting changes, because they will affect the international political and economic landscape for decades to come.