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The FT article “Overseas renminbi lending surges as China steps up de-dollarisation” (Report, October 24) provides ample data that attests to the rise in the renminbi’s use in international trade-related transactions. But does this rise at the expense of the dollar really portend movement towards “a multi-polar monetary system” as you suggest? Hardly.
Contrary to predictions that dollar dominance would suffer as a consequence of Donald Trump’s disruptive economic policies — predictions that turned into a flood in the months of April and May following the unveiling of the “liberation day” tariffs — this dominance has remained absolutely secure.
The dollar’s share of the new forex daily turnover figure of $9.6tn (up from $7.5tn in 2022) was 89.2 per cent, up from 88.4 per cent in 2022, while the euro’s share was 28.9 per cent, down from 30.6 per cent in 2022 (the figures are out of 200 per cent as each pairwise currency transaction is counted twice). The renminbi’s share did indeed rise, but by how much and from what baseline? The answer is 1.3 percentage points, from 7.2 per cent to 8.5 per cent.
The harsh reality is that a currency’s standing in the international currency hierarchy is today determined not by the issuing country’s position in the global physical space of production and trade flows but by its position in the global financial space of securities stocks and portfolio flows.
If the dollar continues to reign supreme, it is because the US dominates the global supply of bonds and equities to the same degree that these securities dominate world GDP.
Until such time as the US’s commanding position in the global financial space can be matched by another country or region, there will be no challenge to the dollar’s dominance, no matter how objectionable US policies may be, and no matter how far other countries “more aggressively pursue their long-term goal of reducing the centrality of the dollar in global financial flows”.
Professor Photis Lysandrou
Department of International Politics,
City St George’s, University of London, London EC1, UK
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