“RMB surpasses US dollar in cross-border transactions, signaling decline of dollar’s global dominance”

“De-dollarization” has entered a new milestone. According to official data, the share of RMB in my country’s cross-border transactions surpassed that of the US dollar in March, the first time in 13 years.

According to the data recently released by the State Administration of Foreign Exchange, in March 2023,The proportion of RMB in the foreign-related receipts and payments of Chinese banks rose from almost zero in 2010 to 48%, a record high in more than 13 years, while the share of US dollars fell from 83% to 47% in the same period, a record low.

This will help reduce the risk of currency mismatches in cross-border transactions, the State Administration of Foreign Exchange said at a first-quarter news conference on Friday.

On Tuesday, the General Office of the State Council also mentioned in its opinion on promoting the stable scale and optimal structure of foreign trade to further expand the scale of RMB settlement for cross-border trade.

In fact,More and more countries are “abandoning the dollar”.

On March 29, the Brazilian government stated that Brazil had reached an agreement with China to no longer use the U.S. dollar as an intermediate currency, but to use its own currency for trade settlement. Brazilian President Lula then publicly called on the BRICS countries to use their own currencies for settlement. “I know that everyone is used to using US dollars, but we can do different things in the 21st century.”

On March 28, CNOOC and France’s Total Energy reached the first purchase transaction of imported liquefied natural gas settled in RMB.

In addition, ASEAN countries also discussed how to reduce the dependence of financial transactions on the US dollar. Malaysia said there was “no reason to continue to rely on the dollar”.

It is worth mentioning that gold is becoming an important tool for central banks against the dollar.

According to the World Gold Council, the amount of gold purchased by central banks in 2022 will increase by 152% year-on-year to 1,136 tons. As of February this year, the global central bank’s gold reserves have seen a net increase for eleven consecutive months.

As for why more and more countries are “revolting”, Ruchir Sharma, head of the international business of Rockefeller Capital Management, pointed out,This is because the US and its allies are increasingly using financial sanctions as a weapon。

According to statistics, as many as 30% of countries now face sanctions from the United States, the European Union and Japan, while the proportion was only 10% thirty years ago.

Everyone suddenly realized that under this system, any country could become the target of sanctions.

With the wave of “de-dollarization” sweeping the world, many people believe that the hegemony of the dollar is coming to an end.

Stephen Jen, the founder of “Dollar Smile Theory” and analyst Joana Freire believe that the US dollar is gradually losing its status as a reserve currency, and under the wave of “anti-globalization”, the necessity of the US dollar as an international settlement currency is gradually disappearing.

They pointed out that in 2022, global central banks are accelerating the reduction of the holdings of the US dollar relative to other currencies, and the market share of the US dollar as a reserve currency will begin to collapse, which is equivalent to 10 times the average annual decline in the US dollar’s market share in previous years.

Nevertheless, they argue that the world monetary system is an infrastructurethere is no other currency that can replace the US dollar in the short term, so perhaps the future will not be a simple de-dollarization processbut a period in which regional currency blocs and currency areas are constantly sprouting, and an era in which the dollar system is constantly facing threats.

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