Speaking to the Strategic Council on Foreign Relations, Mehdi Fakheri, referring to China’s efforts to expand the cross-border use of its national currency and to strengthen trade activity in Yuan, stated that China has been able to quickly and powerfully increase its share of world trade in recent years and in the 20 years since its entry into the World Trade Organization, it has doubled its share of international trade.
He stated that China has the necessary tools to influence international exchange rates and use the Yuan or other currencies that it wants to offer digital or physical form later, and said that these tools may be used in situations where other economic factors remain fixed. There are several factors that may affect China’s foreign exchange policies. One hundred out of two hundred countries in the world have China as their first trading partner. The Chinese have the possibility to ask at least one of these hundred countries to do part of their business in national currency or BNB, which is China’s convertible currency.
This university professor reminded that in 2022, China had about 6.3 trillion dollars in trade with the world, adding that this country had about 3.5 trillion exports and nearly 2.7 trillion imports. Apart from the hundred countries where China is their first trading partner, this country has been able to establish trade relations with different countries as the largest trader in the world, and a large part of these countries are also among the developed countries. In fact, contrary to some notions that state that China trades only with developing and poorer countries, if we pay attention to the composition of China’s trade, China’s first trade partners last year were Southeast Asian countries.
Fakheri added that European Union, the US, South Korea, Japan, Taiwan, Hong Kong, Vietnam, Russia, Brazil, Indonesia and India were China’s biggest trading partners last year. The 20th country was Saudi Arabia and before that, Mexico. This combination means that developed countries are doing business with China and the possibility of this country influencing global trade policies and influencing the financial sector is high. China has the possibility to offer its money as a trading currency in world trade and be accepted.
Emphasizing the need to pay attention to how geopolitical issues are affected by this currency element and its possible consequences for the Chinese government, he said that about four years ago, the fear of the United States and the European Union over the rapid development of Chinese technology made them start a trade war against China.
“Now we have to see China’s desire to quickly introduce the Yuan in international trade transactions, forcing the western bloc to react again, and also what effect does the sudden introduction of the Yuan in international trade have on the value of the Yuan. In addition, the increase in the value of the Yuan and the decrease in the value of currencies such as the dollar and the euro will naturally have a positive effect on the exports of those countries to China and a negative effect on the imports of China. The reasonable and economic rate of the Yuan is always one of the factors that affects the calculations of the Chinese government and prevents emotional and uncalculated actions.”
Fakheri explained that China has to establish a balance between its exports and imports, foreign trade and the use of the Yuan in order to reach the final profit in the long term. About one trillion dollars is added to China’s foreign exchange reserves every year, and a large part of these reserves are in dollars. If this composition changes and the Yuan takes the role of the dollar and the euro, the value of China’s foreign exchange reserves will also decrease. Therefore, China should do this calmly, gradually and by persuading its trading partners in order to achieve maximum profit.
Emphasizing that China has no desire to enter into a trade war with the United States and become a definite winner in it, he added that all countries enter into competition and cooperation within the framework of their national interests, but in the new era, China is not willing to express its foreign policy and international agenda more openly than in the past. Another point is whether the expression of national interests will necessarily end in favor of national interests? By the way, we can learn about this from China. The American market is the most important commercial and financial market for China and it does not want to lose it at all. It is important for Beijing to be recognized as an international interoperable partner in trade and financial issues.
This analyst of international economic issues, recalling that during the international financial crisis of 2008, China bought 3 trillion dollars of US bonds and saved the country’s economy from bankruptcy, added that if the internationalization of the Yuan was China’s first priority, it could have severely devalued the dollar by selling these same bonds.
Fakheri stated that China allows requests to trade with the Yuan be made from business partners and other countries, and pointed out that 30 countries under US sanctions have welcomed to use the Yuan.
“Oil exporting countries because the price of oil is calculated in dollars, may not be able to exchange oil with Yuan in the short term. Therefore, the process of expanding the Yuan is not applicable in the short term and is a medium or long term process”.
This university professor termed Beijing’s use of the word “de-dollarization” as hasty and said that China is more inclined to “Yuanism” than “de-dollarization”.
He stated that China’s effort to expand the use of the yuan has political and economic consequences, and continued that US traditional allies have begun to get closer to China and expand the volume of their trade relations with it, this issue affects the world economy and US superior role in determining financial policies and also affects international trade and will have consequences on the political and international power of the US.
“In the current conditions, China leads the world according to the resources it has. Having financial resources will change the composition of financial and trade partners of the United States and the European Union, and China will have the upper hand, so it will have more power in global equations and exchanges.”
Emphasizing that the geo-economy of the world is changing and China’s role in this field is significant, Fakheri said that “it is important to maintain the current conditions. In recent years, the statistics and reports of the United Nations have indicated a change in the world’s population, and it is predicted that China’s population will be halved in the year 2100. In this case, the population of 800 million will not bring the former economic power. Therefore, it cannot be imagined that China will necessarily be the first economic power in the world in the next 20 years”.