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China’s Yuan Is Gaining Increasing Usage Globally

May 12, 2023

Neelam Rahim | neelam@radioislam.co.za

3-minute read
12 May 2023 | 22:10 CAT

Photo  Credit: Raftar

Photo Credit: Raftar

China’s Yuan is gaining increasing usage globally, gradually pointing to the de-dollarization of transactions worldwide. But countries globally are now lining up backup currencies for trade, as sanctions against Russia over its invasion of Ukraine have led to some prominent world leaders and business figures sounding a warning over Washington’s wielding power.

Senior Research Analyst in Global Markets, Rezwaana Sumad, speaks to Radio Islam International. Sumad highlighted the effects we might see if the dollar is no longer the currency of preference amongst countries regarding trade.

50/ of international trade is settled in US dollars. There are significant market financial exposures, over 5 trillion worth of debt globally held by sovereigns, cooperates, and other entities. Sumad explains if most countries were to step off using the dollar as a means of trade, there would be significantly fewer US dollars circulated globally.

She said a significant portion of global debt, denominated in dollars and most of the commodities priced in dollars, companies and countries need to earn dollars to pay back debt.

“A shortage of dollars globally, sharp appreciation and value in the dollar will consequently result in significant depreciation and weaker currencies,” she says.

Meanwhile, many countries have been in talks about trading in other currencies for several years. In recent years trade and debt have been seen happening in the Euro. The Chinese Yuan has also increased as a percentage of international trade.

BRICS countries also want to start their own Brics monetary forum. According to Nedbank, the shift would take several years, if not decades, for a complete change from the dollar to the Yuan or basket of other currencies due to large long-term debts denominated in dollars and more than half of international trade, still settled in US dollars.

However, a swing in world dominance is seen coming from China, the second-largest economy in the world. With sanctions placed on Russia on the back of the war between Russia and Ukraine, a gradual shift has been seen from the Western powers to more of an Eastern dominance.

Listen to the full interview with Mufti Yusuf Moosagie on Your World Today.

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