Is US-China trade war starting to erode US dollar dominance?
- Asean+3 is considering adding yuan and yen to their regional forex reserves pool safety net
- Analysts say shift to reduce US dollar dominance is underpinned by expectations that trade war will cause shift in consumption and investment patterns away from globalisation
The contemplation by Asian finance leaders to add the Chinese and Japanese currencies to a regional foreign reserves buffer fund is the latest sign that the trade war is causing countries to slowly move away from dependence on the US dollar.
Their consideration, analysts said, could be underpinned by expectations of the shift in world consumption patterns and corporate investments away from a globalised trading system and towards a system centred on the three large regions – the US, the European Union and China – that operate differently.
The 10 members of the Association of Southeast Asian Nations plus China, Japan, and South Korea, together known as “Asean+3”, were reported earlier this month to be considering including the yuan and the yen to their Chiang Mai Initiative Multilateralisation (CMIM) scheme, a framework for multicurrency swap arrangements.
The US$240 billion CMIM scheme was established in response to the 1997 Asian financial crisis to serve as a safety net that provides US dollar support to any one of the countries in the event of a liquidity crisis.
The leaders of Asean+3 said with the region facing threats from trade protectionism and reduced external demand, concrete measures needed to be taken to improve procedures and institutional arrangements of the finance process to foster regional integration and sustainable development.
