The World’s largest economy by purchasing power parity (PPP) is China, well ahead of the United States. But the #1 on nominal GDP is the United States – and that is expected to move to China’s trophy table in years. But China is not just coming for the GDP crown, but a likely massive dislocation of the global economy: “The United States government has been rattled by China’s push to develop a digital alternative to its currency yuan. Bloomberg reported that the Biden administration is stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter.”
Honestly, imagine if Africa is pushing this, bringing its dozens of currencies under a unified supranational digital-based banking ordinance that would make commerce to work more efficiently. This is not even about monetary union with its associated welfare losses, when central banks lose autonomy to the supranational bank, making it harder for them to use macroeconomic tools to adjust for perturbations in their local economies. My point is that a digital clearing house is possible to make these African currencies “disappear” and “dissolve” into bits operationally.
I do think we need to begin that conversation at the African Union as very soon, China will be offering loans in e-yuan, and giving discounts to countries that adopt it. Most African banks would sign up as agents to enable trade in China, and just like that, the United States will understand that empires rise and fall on trade.
Yes, if China disintermediates dollars across countries via e-yuan, everyone will understand that being called the manufacturing capital of the world is not just a statement. Possibly, e-yuan will save many countries about 8-15% lost which is lost during conversion first to US dollars, and then to Yuan as they import from China! This is China 3.0.
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