The Chinese economy’s sheer size and rapid growth are impressive.
China maintained one of the highest economic growth rates in the world for more than a quarter of a century, helping lift over 800 million people out of poverty in just a few decades. The country is the largest exporter in the world and the most important trading partner of Japan, Germany, Brazil and many other countries. It has the second-largest economy after the US, based on the market exchange rate, and the largest based on purchasing power.
Yet, the yuan still lags as a major global currency. The war in Ukraine, which started in February 2022, may change that.
As a professor of finance and expert on international finance, I understand how this geopolitical conflict may put China’s currency on the next phase of its path to becoming a global currency – and prompt the onset of the decline of the US dollar from its current dominance.
Chinese yuan’s slow progress
China has long wanted to make the yuan a global force and has mounted significant efforts to do so in recent years.
For example, the Chinese government launched the Cross-Border Interbank Payments System, or CIPS, in 2015 to facilitate cross-border payments in yuan. Three years later, in 2018, it launched the world’s first yuan-denominated crude oil futures contracts to allow exporters to sell oil in yuan….