My Take | Forget a shooting match, economic warfare is enough to impoverish most of us
- New study comes up with terrifying scenario involving Western and Chinese payment systems that is already here
Will the yuan ever take on King Dollar as an international currency? This has been the trillion dollar question and has been argued ad nauseam. However, a new joint study put out by the Centre for Economic Policy Research (CEPR), a pan-European think tank, and the IESE Business School of the University of Navarra offers an interesting take and paints a scary scenario.
Yes, it’s possible for the yuan to become a rival currency, but the circumstances of that becoming a reality may not be welcome by anyone, least of all the Chinese. In other words, be careful what you wish for.
The report, titled The International Economic and Financial Order After the Pandemic and War, examines a wide range of issues, but most of them probably cater more to specialists and policymakers.
Given the space limitation here and the likelihood that most readers will be more interested in the Chinese-American rivalry, including the contest of their currencies, I will focus on the most sensational section of the 170-plus-page study.
The rise of China and its currency has long raised the question about its potential to threaten the dollar’s long dominance since the end of the second world war. But the war in Ukraine leading to Western financial sanctions against Russia and the pioneering digitalisation of the yuan by Beijing have made the question even more urgent.
“These developments collectively constitute the sharpest shock to the status quo since the collapse of the Bretton Woods system 50 years ago,” the authors of the study write.
