Abstract
The chapter focuses on the rapid growth of China’s economy and assesses the likelihood of China ending the US dollar standard. In doing so, it raises key issues at the heart of the Chinese economy, particularly following the Great Financial Recession of 2008, whilst evaluating the Chinese states’ capacity to address them. Overall it argues that while the Chinese economy is dependent on US dollars, its mid-to-long term goals are surely to significantly reduce this dependency so that the economy can transition to one primarily driven by consumption and thus avoid the so-called “middle-income trap”. Given this, the chapter argues that an end to the dollar system is, in fact, in sight.
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Notes
- 1.
Hong Kong was already admitted to the WTO in 1995 and formally handed over to China in 1997.
- 2.
Of course, earlier economic powers such as the United Kingdom were accused of similar practices during the industrial revolution (Chang 2012).
- 3.
Although household debt to GDP is lower in China (approximately 60%) now than the US (approximately 98%) at the onset of the GFC (Trading Economics 2020).
- 4.
This is also true for wealth management products over half of which are issued by regulated banks but channelled into short-term loans and securities through partners and subsidiaries with a different legal status to the bank (Toritani 2020, 105–107).
- 5.
In 2016, Poland also became the first European government to issue panda bonds (xiongmao zhaiquan), RMB-denominated bonds from non-Chinese issuers sold in China, following an agreement between the PBoC and Poland’s Ministry of Finance (Zhang, June 22, 2016).
- 6.
Greece’s decision to join this partnership, despite the fact that it was never a member of the Eastern bloc (despite its civil war) is likely a key point of focus for other EU member-states. While the European Union bailed out Greece after the Eurozone Debt Crisis, repayment is scheduled to last until 2060, and because the state cannot print its own currency, it will be forced to impose austerity for over four decades in order to deleverage (Maza, August 20, 2018; Varoufakis, August 26, 2018). Were Chinese investment to help Greece pay off these debts earlier or at least ease the burden of austerity on Greek citizens (including those still unborn), other member-states would surely be interested in joining the 17 + 1 framework which would expedite and broaden China’s access to the European market.
- 7.
This had been planned before the GFC, however.
- 8.
China has signed bilateral local currency swap agreements with the central banks/monetary authorities of the following countries, regions, or unions: Albania, Argentina, Armenia, Australia, Belarus, Brazil, Canada, Chile, Egypt, European Union, Georgia, Hong Kong, Hungary, Iceland, Indonesia, Japan, Kazakhstan, Macao, Malaysia, Mongolia, Morocco, New Zealand, Pakistan, Qatar, Russia, Serbia, Singapore, Sri Lanka, South Africa, South Korea, Suriname, Switzerland, Tajikistan, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, Uzbekistan (PBoC 2020).
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Pope, C.G. (2022). Chinese Economic Growth and Prospects of a New International Monetary Regime. In: Haba, K., Canavero, A., Mizobata, S. (eds) 100 Years of World Wars and Post-War Regional Collaboration. Springer, Singapore. https://doi.org/10.1007/978-981-16-9970-2_18
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