China’s Aim to Remove the US Dollar as World Reserve Currency
According to a statement by a Chinese Ministry of Foreign Affairs representative, the economic and foreign policies of the United States are creating an imbalanced global financial system that could lead to instability.
Chinese concerns about US economic policies
The spokesperson urged developed nations like the US to re-evaluate their economic policies, as they can negatively affect developing nations. They also expressed concern about the impact of American policies on other countries, including the downfall of banks like Silicon Valley Bank, Signature Bank, and Credit Suisse.
The spokesperson stated that the failure of these banks and the inability of the US to manage its economy has made it difficult for developing nations to succeed. He also mentioned that many in the international community share these concerns and believe US economic policies threaten global financial stability.
Safeguarding the US dollar’s status as the world’s reserve currency
The representative further stated that a significant portion of the debt burden of financially distressed nations rests with the United States. The spokesperson attributed this issue to the policies of the US government, which have enabled commercial creditors to sow financial instability.
During his confirmation hearing, Jared Bernstein, President Joe Biden’s nominee for Chair of the Council of Economic Advisors, stated that evidence suggests that China aims to remove the US dollar from its position as the world reserve currency. When asked by Senator Bill Haggerty if the US would be better off if the USD were dethroned, Bernstein responded with a definitive “no.”
Bernstein, who previously served as Biden’s chief economic adviser as Vice President, believes the US should safeguard the dollar’s status as the world’s reserve currency. According to him, this is crucial for various reasons, including the advantages that come with having control over the world reserve currency, such as the ability to enforce sanctions as the US did against Russia.
The dollar’s integrity and overspending issues
Bernstein recognizes that being the global reserve currency has its drawbacks. One of them is that US exporters may encounter increased export expenses and revenue loss owing to the dollar’s robustness.
To protect the dollar’s integrity, Bernstein and Haggerty agree that the US should raise its debt ceiling while simultaneously addressing overspending and fiscal responsibility issues. Bernstein believes that defaulting on the national debt as a political tool would contradict their goals.