Spiraling US Debt A Golden Opportunity For China

2024-10-23 06:15:18

(MENAFN- Asia Times) China is gradually establishing itself as a major player in what has recently been called the Global South , previously known as the Non-Aligned Movement . Over the last few decades, China has become the world's biggest creditor of developing countries. That has prompted many to fear that it will subjugate partners through the “debt trap” and use this to establish a“hegemonic sphere of influence.”

China's economic position is so strong that it is now considered the main threat to the US dollar. It is an influential member of the BRICS+ group (which also includes Brazil, Russia, India and South Africa). This group is working to establish a multipolar world that challenges the hegemony of the West, specifically the leadership of the United States.

Without using the term“threat,” the US administration now sees China as the “most serious long-term challenge” to the international order . It's easy to understand why since China's strategic objective is to put an end to the supremacy of the US dollar , the keystone of US hegemony.

As a researcher in international political economy at the Université Laval, I am looking at the role China is playing in the de-dollarization of the world.

Dollar stronghold

The supremacy of the US dollar underpins American hegemony in the current international order, as French economist Denis Durand explains in his article“Guerre monétaire internationale: l'hégémonie du dollar contestée?” (International currency war: the dollar's hegemony challenged?).

The hegemony of the US dollar over the world economy is reflected in its over-representation in the foreign exchange reserves held by the world's central banks. The greenback still outstrips other currencies even though there has been some erosion in this.

Despite a fall of 12 percentage points between 1999 and 2021 , the share of the US dollar in the official assets of the world's central banks remains fairly stable at around 58-59%.

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