China’s dominance in digital currency will follow naturally from its position as the world’s top exporter.
China has no intention of replacing the US dollar with its RMB within the framework of the existing world banking system, as People’s Bank of China Deputy Governor Li Bo said April 19. In fact, China has no incentive to this, and could not do so even it wanted to.
The $16 trillion of offshore dollar deposits at international banks won’t turn into the equivalent amount of Chinese yuan. Instead, that $16 trillion will shrink to a small fraction of its present volume, because the Big Tech/fintech revolution will make them redundant. Instead, as Morgan Stanley analysts explained this week, “banks will lose their deposit base” as digital currencies replace their most basic functions.
What Western analysts fail to grasp is that China is not trying to take the place of the United States. Rather, China is creating a new system of world trade and finance that will – as a byproduct – replace the methods of trade financing that have remained in place since the Venetian Republic introduced them in the 13th century.
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