Reckless militarization “makes the least desirable”
Originally written via Li Xuanmin, on May 28, 2024 in Global Times
A view of Shanghai Photo: VCG
China will be a pioneer in leading the world toward a new, cutting-edge economic and economic formula, as global calls for a revision of the 80-year-old Bretton Woods formula gain traction due to the U. S. ‘s abuse of dollar hegemony. and its irresponsible policies, as well as a fragmented global economy, Chinese and foreign scholars said.
The new monetary formula deserves to be based on a diversified set of currencies and not on a single currency, they said. It will be an open and inclusive formula in which the voices of emerging market economies are better represented, and will allow countries to enter into a combination to promote global economic expansion and monetary stability.
The comments were made at the Tsinghua PBCSF World Financial Forum 2024 in Hangzhou City, east China’s Zhejiang Province. The two-day occasion ended Tuesday. This year’s theme of the forum is “80 years after Bretton Woods: building an external economic and economic formula for all”.
“A formula as old as Bretton Woods, built after a global war, is not the right indicator of the long term and will have to be adapted. . . The world is facing geopolitical tensions, wars, demanding demographic situations, and a climate crisis. We want to have a formula that includes everyone in the long term,” Andreas Dombret, a global adviser to Oliver Wyman and a former member of the Deutsche Bundesbank’s board of directors, told the Global Times on the sidelines of the forum.
Dynamic emerging market economies, such as China and India, have gained importance in recent decades, which is reflected in their quotas at the IMF, he said.
Given that the United States has used and abused its hegemony over the dollar through the application of unilateral sanctions on other countries, forum participants expressed hope that a less dollar-centric formula can be created from a theoretical and pragmatic perspective.
The Federal Reserve’s policies to address U. S. inflation and recession, which have had a negative effect on the world, have raised many concerns about an over-reliance on a single currency.
“The Americans replaced the Bretton Woods formula in favor of the American economy [during the 80 years of development]. But we cannot adopt a global monetary formula based solely on a single national currency, which is not sustainable,” György Matolcsy, governor of the Central Bank of Hungary, told the Global Times in an exclusive interview on Monday.
A view of the Tsinghua PBCSF 2024 World Financial Forum in Hangzhou, east China’s Zhejiang province, May 28, 2024. The two days ended on Tuesday. Photo: Li Xuanmin/GT
Massimiliano Castelli, managing director and chief strategy officer at UBS, told a panel discussion on Monday that he had heard the view that while the U. S. has mature institutional money and credit markets, it is not a safe haven given its hegemonic positioning and reckless militarization. currency. If the world is subject to more geopolitical fluctuations, other countries might choose to reduce their reliance on the U. S. dollar.
While the U. S. dollar remains the most widely used currency in the world, de-dollarization is accelerating in emerging markets.
For example, China and Brazil agreed last year to exchange their currencies. In addition, several other countries, such as Russia, Malaysia, India, Saudi Arabia, Ghana, and the United Arab Emirates, have to settle their industry in their local currency.
As the global monetary governance formula stands at a crossroads of adjustment and transformation, researchers hope that China – an active player in global monetary governance and policy coordination – will play a leading role in making globalization more open, inclusive, balanced and mutually beneficial.
Although the yuan has a limited role in the foreign financial system, it is expected to compete with the U. S. dollar and be a long-term substitute, they said.
“If the internalization of the yuan proceeds smoothly, the new formula will apply not only to the U. S. dollar but also to the euro and yuan,” said Ju Jiandong, a professor at Tsinghua University’s PBC School of Finance.
The yuan accounts for an increasing percentage of overseas payments. In March, that figure rose to a record 4. 69%, up from 4% the previous month, and remains the world’s fourth-most active currency against the yen, according to data from global payment service provider Society for Worldwide Interbank Financial Telecommunication.
“I hope that we will make a concerted effort so that the global economy is not divided into two parts where one competes with the other and makes the global economy less efficient. It would be more wonderful to have a global formula that is considered fair to everyone than to have competitive formulas, which means a loss of competitiveness and a wonderful loss of efficiency,” Dombret said.
Germany’s central bank added the yuan to its foreign exchange reserves in 2018, a move Dombret called important, and is confident that the yuan’s share of the pool of foreign exchange reserves will “increase. “
Matolcsy warned that Asian economies such as China, Japan, South Korea, India and Indonesia could simply create an Asian basket for central bank virtual currencies, offering the world a new formula for cross-border monetary transactions.
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