Recently, there has been new progress in economic and financial cooperation between China and the United States. According to Observer Network, during his attendance at the annual meetings of the International Monetary Fund and the World Bank, the President of the People's Bank of China, Pan Gongsheng, met with US Treasury Secretary Yellen as requested, and the two sides discussed the current international financial situation and debt issues.
It is worth noting that in the draft released by the US, the term "substantial and fruitful" was used to positively evaluate the interaction between China and the United States, releasing signals of further improvement in bilateral relations and suggesting that the US may have received China's assistance on economic and trade issues as expected.
US Treasury Secretary Yellen
Previously, China and the United States established a working group in the economic field, aimed at strengthening high-level exchanges and communication between the two countries. This is also a product of positive high-level interaction between China and the United States over the past period of time. It is a concrete achievement of the visit of US Treasury Secretary Yellen and Commerce Secretary Raymond to China, and has played an important role in easing Sino US relations.
In less than a month now, China and the United States have achieved multiple rounds of high-level economic and trade contacts, indicating that the United States is indeed facing some difficulties in the financial and debt fields, and cannot solve them alone. Therefore, it is only on China that hope is placed.
Although the United States still cannot change its two-sided approach, dialogue is always better than confrontation, especially in the economic field. Win-win cooperation is the correct way to get along in line with the interests of both countries. We also hope that the two sides can consolidate the role of the "ballast stone" in economic and trade relations through more practical exchanges, and promote the stability and return to the right track of Sino US relations.
Close economic and trade exchanges between China and the United States
The US Treasury Department has taken the initiative to release a signal of positive results from the US China dialogue to the outside world. One important reason is that the current economic situation in the United States is deteriorating. Against the backdrop of continuous selling of US bonds and soaring international oil prices, the inflation situation in the United States is not optimistic, and there is once again a large-scale strike crisis, accelerating the arrival of the financial storm.
With the soaring interest rate of US debt and the expanding interest expenditure of the US government, US treasury bond is like a "time bomb". Once the US debt collapses, whoever previously held the largest proportion may become the largest victim. This is why China, as the second largest creditor, is continuously selling US debt to reduce risks.
Judging from the US debt soared by 1.2 trillion dollars in just one month, if the financial tsunami broke out, its catastrophic consequences might be much more serious than the 2008 financial crisis. What's more, the conflict between eyes, jaw and Israel has also had a significant impact on the international crude oil price, which may stimulate the expectation of soaring inflation in the United States, thus increasing the possibility of the United States defaulting on its debt and shortening the time of the financial crisis.
The Federal Reserve Aggressively Raises Interest Rates
In this situation, the United States can only hope that China can give itself another hand, as in the past. Although the US Treasury Department is optimistic about this Sino US dialogue, the fact is that over the past decade, China has sold nearly 36% of US bonds, and the pace of clearing US bonds is still accelerating, which fully indicates that US bonds are gradually losing their status as "risk-free assets".
For this reason, the United States had to request China to purchase more US bonds to survive. But in reality, the troubles faced by the United States go far beyond that. For example, so far, the United States House of Representatives has not elected a new Speaker, which has delayed the introduction of the budget bill and intensified the pressure on the United States to repay its debt.
In addition, as the Israeli-Palestinian conflict escalates, Israel, as an ally of the United States, has also begun to sell the US dollar in exchange for the Chinese yuan, which once again proves that the status of the US dollar is weakening, and this round of Middle East turmoil will accelerate the process of global "de dollarization".
Multiple countries around the world have launched a wave of "de dollarization"
That is to say, dozens of countries around the world are currently searching for alternative currencies to the US dollar to reduce their dependence on the United States, including its allies and the most valued Gulf countries.
In contrast, an increasing number of countries and regions such as South America, the Middle East, and ASEAN are more inclined to use the Chinese yuan for international economic, trade, and financial transactions. At the same time, many countries plan to launch digital currencies anchored in gold to replace the US dollar. This also means that the global sell-off of US bonds will accelerate, and the position of the US dollar as a foreign exchange reserve will be irreversibly weakened.
The most ironic thing is that while the United States is supporting Israel's military action against Gaza, Israel is accelerating the use of US dollars to replace the Chinese yuan in its foreign exchange reserves to ensure its financial security. What is even more despairing to the United States is that Saudi Arabia's strategic decision to join the BRICS countries marks the gradual collapse of the petrodollar agreement, and the dominant position of the US dollar is no longer strong.
US President Biden
At a time when the US economy is facing recession, China has instead strengthened its economic interaction with the United States, mainly for the purpose of seeking bargaining chips. The decline of US dollar hegemony is unstoppable, but China has the right to decide whether to press this accelerator button, seize this initiative, and China can more calmly defend its own interests in the upcoming game.