In an interview with Le Monde, economist Michel Aglietta explained how the advent of central bank digital currencies is reshuffling the international monetary system.
A series of punitive measures by the West against Russian financial institutions could have a side effect: encouraging emerging countries to move more away from the dollar. But it has also accelerated the yuan’s appreciation, explains economist Michel Aglietta, scientific advisor to the Center for Forward-looking Research and International Information (Cepii).
In his April 20 co-published book, The Race for Global Currency Hegemony. Tested by China-US competition (Odile Jacob, p. 304, €24.90, with Guo Bai and Camille Macaire), he explains how China will disrupt the international monetary system.
Sanctions on Russia’s central bank could cause other monetary institutions to stop holding the dollar as a reserve currency. Is this the end of dollar hegemony?
The diversification of world foreign exchange reserves has already begun: between 2001 and 2021, the dollar’s share has fallen from more than 70% to just 59%. The yuan’s weight remains limited, but it is rising at a high rate as many countries, especially those in Asia, seek to escape the Western orbit. Therefore, the Ukrainian war will undoubtedly accelerate the international appreciation of the renminbi and the devaluation of the king’s dollar.
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In the short term, China may be careful to avoid being Russia’s direct and decisive aid. However, Beijing is taking the long view. Its goal is to strengthen its autonomy and independence from the United States, especially with regard to raw materials and new technologies. However, Russia exports raw materials and rare metals, which are essential for the development of high technology.
Combined with gas from Siberia, which Moscow could one day sell to China: no connection is allowed yet, but it makes sense from a geographic point of view. Beijing knows this and, meanwhile, is continuing to roll out its digital currency.
What effect can the appreciation of the renminbi play?
China is leading the way, as it deployed e-yuan across the country during the Olympics in February. It is now starting to develop it internationally, through the “mBridge” project, a digital currency platform with Hong Kong, Thailand and the United Arab Emirates, which will allow cross-border payments to be made in real time at a lower cost as there are no intermediaries.