China’s Economic and Currency Management Will Make It Difficult to Dethrone the Dollar

Abstract

This paper focuses on the rivalry between the US and China, with particular emphasis on the renminbi (RMB) and the US dollar. It examines three related points. First, for China to upend the dominance of the US dollar and replace it, even partially, with the RMB would require major—and probably disruptive— changes in China’s financial markets and monetary policies. Is the Chinese government willing to take those steps? Second, can China overtake the US economy and provide another incentive for international investors to start switching to the RMB? And third, is it still a question of whether de-dollarisation is happening, or has the question moved on to asking how fast the RMB can rival the US dollar in the 21st century? Finally, the paper examines China’s economic problems, which are set to damage the RMB’s reputation and progress as a reserve currency.