Currency war: United States vs. China-Russia

 



Many analysts consider 2021 to be the beginning of a new Cold War. In the new situation, Russia, the heir apparent of the Soviet Union, is not the main opponent of the United States in this Cold War. 

China is going to be the main opponent of the United States in this cold war. 

However, a strategic alliance is going to be formed between China and Russia to deal with the United States.

The question may arise as to why China is going to be America's adversary. The simple answer is probably that this year's war is going to be more about economic domination than about military power and military technology. 

It has always been true that without economic power one cannot compete in global influence.



 But this time the main reason for the competition is probably going to be domination by economic power.

After 2020, China will begin to spread its folded wings. This analysis has been done by US think tanks for decades. 

The United States National Intelligence Council (NIC) has released three large research reports on what the world will look like in 2020, 2025 and 2030.

 The analysis of China was unmatched by any other country. And the main focus of these analyzes is on how China's economy is developing.

 It included an analysis of how China has at one time surpassed the American economy to become the world's number one economy.

From the traditional communist form led by Mao Zedong, Deng Xiaoping led China to integrate the free market and the global economic system. 

Gaining more power than idealism became the main goal of the Chinese economy. Deng's leadership took China to new economic heights. 

Through the path of investment and trade, a network of Chinese economic influence was created from the capitalist first world to the poorer countries of the third world of Afro-Asia.

After coming under the leadership of the current President of China, Xi Jinping, he also started the activities of global geopolitical influence based on China's economic and trade dominance. 

And this is the background to the creation of the new Cold War perspective. An important issue in this regard is to challenge the global economic system as well.

This challenge has been met on the one hand by claiming a share in policy-making in proportion to the world-economy partnership in the management of the World Bank-IMF, known as the Bretton Woods system. 

At one time, the organization started its journey by determining the ownership of the member countries in this ratio. 

But after many ups and downs in the global economy, the management or ownership of the World Bank Group has not changed in that way.

 As a result, these institutions, the regulators of the world economy, remain dominated by the West. China, Russia and some other emerging economies want to reform the system. 

At the same time, the idea of ​​creating an alternative global economic institution became active among them.

There is no indication yet that the United States or the European Union will agree to the World Bank-IMF reform proposal. 

However, the process of creating alternative institutions has come a long way. BRICS Bank (a founding member - China, Russia, India, Brazil and South Africa) later became the New Development Bank. 

At the same time, after starting the activities of the Asian Infrastructure Development Bank, the real challenges faced by the World Bank-IMF and its partners.

Some economies around the world, such as China, Russia, Japan, and regional alliances such as the European Union (EU) or ASEAN, have continued their efforts to introduce their currencies parallel to the US dollar in international transactions. 

 Now, if unacceptable conditions are imposed on the members of the World Bank Group, the New Development Bank and the Asian Infrastructure Development Bank appear before them as alternatives.

Also, the most dangerous signal for the United States is the initiative to create an alternative international currency. 

Some economies around the world, such as China, Russia, Japan, and regional alliances such as the European Union (EU) or ASEAN, have continued their efforts to introduce their currencies parallel to the US dollar in international transactions. 

They even have the idea of ​​using gold or SDR as a medium of exchange instead of dollars.

In March 2009, China and Russia called for the creation of the first new global currency. 

They wanted, the world to create a reserve currency that would be stable in the long run. 

China at the time called on the International Monetary Fund (IMF) to develop a currency to replace the dollar for every international transaction.

Such a move is known as the "Anti-Dollar Alliance", a combination of efforts by Russia, China and Ecuador. Russia and China have long sought reforms to eliminate the US dollar in their cross-border transactions.

 It was part of the idea of ​​forming an economic forum in Russia known as the ‘Eurasian Strategy’. In May 2014, after nearly ten years of negotiations, the two countries took a major step towards reducing the use of the US dollar. 

At that time, China signed a 30-year natural gas agreement with Russia worth about 4 billion. Under the energy deal, the two countries agreed to use the national currency instead of the US dollar in transactions.

Ecuador, Cuba and Bolivia have also taken several initiatives to develop alternative currency and payment systems. In this case, the steps taken by Ecuador were particularly significant. 

Despite international sanctions on Iran, Tehran signed several MoUs with Ecuador's central bank in 2008.

in December 2014, the implementation of the new National Digital Currency (SDE) began in Ecuador. This allows eligible users to set up accounts and use this e-currency as a means of transaction. 

When designing to support Ecuador's existing dollar-based financial system, it was decided to create a new form of electronic money without adopting a mobile payment system. 

Some analysts suspect that the real goal is to put pressure on the US dollar.

Perhaps the most ambitious initiative of Russia and China so far in surpassing the US dollar in trade agreements and corporate debt is the effort to build an effective alternative to the Brussels-based Society for Worldwide Interbank Financial Telecommunications (SWIFT) system. 

In October 2015, the Central Bank of China launched the China International Payment System (CIPS) as a major step towards facilitating the clearing of Yuan transactions. 

Through this, Beijing encourages the internationalization of its currency. Similarly, Russia's central bank introduced a domestic 'suite' payment system for Visa and MasterCard transactions so that Westerners could not block cards through financial sanctions.

As part of the bilateral initiative, in December 2011, China and Japan agreed to use their currencies in bilateral trade. 

Japan also decided to buy Chinese bonds. China and Japan decided to reduce corporate spending and increase bilateral trade through the direct exchange of their currencies. 

The agreement allows Chinese and Japanese currencies to be exchanged directly with each other. 

Previously, businesses in both countries had to buy dollars at extra cost before converting to the desired currency.

In March 2012, the BRICS countries began discussing the use of their national currencies when trading with each other. 

Under the agreement, the five countries signed two agreements on inter-BRICS trade and local currency lending to accelerate economic growth.

Iran was one of the most aggressive countries in international trade when it moved away from the dollar.

 Iran uses "tools" such as barter or barter to pay in local currency to avoid the US dollar in response to US sanctions.

Even Europe was active in finding alternatives to the dollar for international transactions.

 This has intensified, especially after several US sanctions and unilateral decisions on global trade and financial transactions.

 The IMF has also published several reports calling for the replacement of the US dollar as the world's reserve currency, possibly due to European influence.

 However, despite years of efforts, the euro, yuan or yen has not been a viable alternative to the US dollar. But this has challenged the dominance of the dollar.

The use of foreign currency involves additional costs associated with transactions, as well as exchange rate risks. 

One study found that if the exchange rate of the dollar increased by an average of 1.0 per cent against all other currencies in the world, the total trade volume between the rest of the countries would decrease by 0.6 to 0.8 per cent within a year.

At one time, almost 100 per cent of international trade was conducted in US dollars. 

During the Soviet era, attempts were made to introduce alternative trade through barter, but it was not universally accepted. 

The US dollar came under some pressure after the European Union introduced a common currency, the euro. 

But the euro has lost some of its importance as an international currency since Britain held its pound and, most recently, exited the European Union. 

Now China has created a real challenge for the United States.

China has already taken various initiatives to create an alternative global trade currency. After Putin took over the leadership of Russia, the then Obama administration imposed an economic blockade on Russia. 

This was followed by a Sino-Russian strategic agreement to create alternative currencies and challenge the global economic system, which was joined by several countries, including blockaded Iran.

Entrepreneurial countries launching foreign currency activities in the national currency to avoid the US dollar and US-centric trade process. 

States such as China, Russia, Iran, India and, in some cases, Turkey, are also participating in the initiative. This poses a real challenge to the global dominance of the US dollar.

One of the most recent news is that China has started work to create an international digital currency. Russia also supports this effort. 

The US dollar could lose its dominance if gold reserves are effective instead of digital currencies and dollars. 

America's economic and commercial power is declining because of state characteristics. With the loss of a single dominance in technology, American trade has become dependent on Logic and IT

At the same time, the role of the United States in influencing the world as a regulator of the global trade system and the currency has been challenged. 

President Trump's excessive anti-China rhetoric was considered by many to be a matter of personal preference and dislike.

 Since Biden's administration took office in the United States, there is no doubt that the US-China policy is not a matter for the administration of any party or individual.

 This policy is related to the long-term doctrine of America. And the main reason for America's deep vision or policy to resist China is to challenge the United States economically to China.

America's economic and commercial power is declining because of state characteristics. With the loss of a single dominance in technology, American trade has become dependent on Logic and IT

At the same time, the role of the United States in influencing the world as a regulator of the global trade system and the currency has been challenged. 

As a result, the main goal of US influence in the world in the new situation will be to maintain the influence of the economy and currency.




 Anyone who wants to take an alternative path, in this case, can become the target of American policy and action. 

Apart from China and Russia, the United States may clash with other countries that are active in formulating independent policies. In this case, 2021 seems to be an important year.

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