During the competition between the European and American currencies, which is especially noticeable in the EUR/USD pair, few people pay attention to the dynamics of Chinese currency. At the same time, the yuan also seeks to strengthen its position under the global financial sun. Experts believe that China will achieve what it wants sooner or later.
The strategy of gaining global leadership in the financial arena, used by the yuan, does not involve aggression. On the contrary, it is a quiet but persistent progress towards the goal. China uses every chance to increase the attractiveness of the national currency. Ideally, the yuan seeks to seriously displace the dollar, if not taking its place in the global financial system, then making the USD a worthy competitor.
The first step towards weakening the dollar's strength was the events of almost twenty years ago, when China entered the World Trade Organization (WTO) in 2001. According to analysts' observations, since that time, the Middle Kingdom has imperceptibly but constantly affected the growth of the value of the US currency and the decrease in the yield of US bonds.
Over the past two decades, China's share in the total global liquidity of $ 140 trillion has soared from 6% to more than 25%. At present, it uses dollars in international monetary settlements. Chinese authorities are investing in the US currency, providing the necessary incentives for their economy, which needs a lot of USD. According to experts, the growth of the specified currency by almost 30% and the steady decline in the yield of American bonds are caused by the actions of the Chinese authorities.
According to preliminary calculations, this could lead to a decline in the value of the dollar by almost 25% in the near future, and the yield on US treasury bonds will test 2% again. If this option is implemented, the European currency will enter the scene, which will take the chance of strengthening amid losses from the American side.
Currently, a number of factors are playing into the euro's favor, including improving macroeconomic indicators in the eurozone. According to the Eurostat report, the EU recorded an increase in business activity in production to 47.4 points, as well as a marked increase in retail sales. This indicator soared to a record 17.8% in the last month of spring, which was higher than the expectations of economists, who predicted an increase of 15%. This strengthened the position of the eurocurrency, who intends to squeeze again the weakening dollar in the EUR/USD pair.
On the other hand, the yuan may become an ally of the euro in this competition for leadership. At the same time, the European currency should not count on special support from the Chinese one. According to analysts, this is more a "friendship" of two currencies against the power of the dollar than a close-knit union of equal partners. experts are sure that the parties (euro/yuan pair) cannot avoid pulling the rope in their direction.
However, a union of Chinese and European currencies can benefit both. For example, even a partial abandonment of the USD can help strengthen the euro and strengthen the position of the yuan. One way is to attract Chinese assets to Europe, and the first step towards the implementation of this project will be the issuance of Eurobonds in the amount of € 750 billion, as previously reported. China will need a lot of changes in the stock market to get off the so-called "dollar hook". Unlike European bonds, the instruments of the Chinese exchange market are mostly inaccessible to foreigners. As a result, there are difficulties with attracting foreign capital, and China has to return to the starting point – to the dollar that has been tested by time.
European stock markets also faced problems when the yields on most Eurozone bonds became negative. During this period, liquid foreign capital rushed to the United States in search of an alternative. Investments in US currency have grown significantly. From the end of the crisis of 2009 to the present day, the US debt markets have satisfied the need for safe assets of investors in an amount equal to almost 50% of US GDP.
The actions of world capital strengthened the position of the dollar, which was the leader among major currencies for a long time. Currently, the throne under the US dollar is staggering, but it turned out to be more stable than expected. According to experts, a possible union between China and the European bloc countries poses a threat to the dollar. If this scenario is realized, the US currency will noticeably weaken, while the European currency, on the contrary, will receive an additional chance for growth and support from the yuan.
Recently, China has been actively trying to get away from settlements in dollars, using a variety of tools. One of them was the digital yuan, which is now being actively developed. The result of this innovation is still difficult to predict, but experts admit that the development will be successful in the medium-term.
According to analysts, the tactics of a quiet attack, resembling the tread of a crouching dragon, are characteristic of China. Most often, it seeks to achieve what it wants not by gross onslaught, but by the so-called "silent glanders. A This strategy applies to the spread of the Chinese currency around the world in order to recognize it as the global financial system. Experts sum up that the yuan will try to unseat the dollar from its throne in the near future, and in this confrontation, the Euro may not be an ally, but a competitor.
