Renminbi Liquitidy Arrangement – China’s New Project to Undermine the American Dollar King.

To achieve his ultimate goal, Xi Jinping will have no choice but to knock the US dollar off its pedestal.

As we reach the middle of the year 2022, this first reality is obvious: the American dollar remains more than ever hegemonic at the global level. The war in Ukraine started by Vladimir Putin has only strengthened the dominance of the greenback. And this, for 3 main reasons with notably a demand which is increasingly strong.

America is back in the limelight in this war, and this is having a positive impact on the US dollar.

That being said, make no mistake about it. China's goal for the future remains the same: to become the world's leading superpower ahead of America. This is the ultimate goal of Xi Jinping and the CCP. All of China's efforts are directed toward this single goal.

The Belt and Road Initiative, or the digital yuan, everything is done to undermine the domination of the greenback over the world.

China has just announced a new initiative that is part of this objective to fight against the hegemony of the American dollar over the world. A problematic hegemony for China, because it gives an exorbitant privilege to America and will not allow China to become the first world superpower in the future.

China wants to set up a liquidity reserve called “Renminbi Liquidity Arrangement” with Indonesia, Hong Kong (recognized by China as a special administrative region), Singapore, and Chile. They should each contribute 15 billion renminbi (about 2.1 billion dollars).

The liquidity pool could be used in future periods of market volatility. The participants would be the following central banks: the People's Bank of China, Bank Indonesia, Bank Negara Malaysia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore, and the Central Bank of Chile.

A long-term effort for China

“When in need of liquidity, participating central banks would not only be able to withdraw their contributions but also access additional funding through collateralized credit,” the People's Bank of China said.

The Swiss-based Bank for International Settlements (BIS) would hold the funds.

Beijing's plan is to strengthen its currency in the global market and weaken the dominance of the US dollar. The internationalization of the yuan (the name of Chinese coins and bills, the renminbi is the name of the currency) will be a long-term process. This is what Ding Zhijie, head of the State Administration of Foreign Exchange (SAFE) research center, says in the Chinese magazine Modern Bankers:

“In the future, we need to strengthen regional monetary and financial cooperation.”

The yuan will not immediately supplant the U.S. dollar's position in the global market, far from it. As of April 2022, 2.14% of global payments were made with the yuan, while the US dollar held 41.81% of the global share.

A new common reserve currency for the BRICS under study

For years, China has been trying to internationalize the use of its yuan. The country has concluded more than 3 trillion yuan in bilateral currency exchanges with more than 40 countries, reports the Hong Kong-based South China Morning Post newspaper. These include 350 billion yuan with the Bank of England and the same amount with the European Central Bank and 150 billion yuan with Russia.

Meanwhile, Russia and China are also working on a new reserve currency. They want to do it in cooperation with the other BRICS countries (Brazil, India, and South Africa).

“The issue of creating an international reserve currency based on the basket of currencies of our countries is currently under consideration,” said Russian dictator Vladimir Putin, quoted by the Russian state news agency TASS.

“This is a move to address the perception of American hegemony over the IMF,” said Chris Turner, global head of markets at ING. “This allows the BRICS to build their sphere of influence and currency within that space.”

We can see the will of China, supported by Russia, to undermine the current monetary order to create a new world monetary order that would be more favorable to it. A Bretton Woods III backed by outside money that would give pride of place to gold, commodities, and why not Bitcoin.

The G7's ban on Russian gold could be seen as a counterproductive measure for the West, which would risk damaging a gold exchange system that will be more than ever under pressure in the months and years to come.