Why China can't break away from US dollar

New Delhi, July 15 (IANS) There is no escape from the US dollar for China even as Beijing propagates a 'de-dollarisation' campaign to promote its own currency, the renminbi, to settle payments in international trade and debt repayments.

“China’s export-driven economy is built on access to dollar markets, dollar denominated demand and a global payments and settlement infrastructure that is still overwhelmingly US-centric.

For China, a sudden or radical break from the US dollar would not be an act of liberation. It would be an act of self-harm,” according to an article in The Globalist online magazine.

It highlights that the dollar plays the role of the backbone of global finance. This includes full currency convertibility, deep and liquid financial markets, credible legal protections for investors, as well as payment systems that are trusted well beyond one’s own alliance network.

China offers almost none of these advantage at the required scale.

The article points out that the renminbi is tightly managed and only partially convertible. Capital controls remain central to how the Chinese Communist Party maintains control over the domestic economy, cushions shocks and sustains politically important sectors that generate overcapacity.

“Simply put, a genuinely global reserve currency cannot be locked inside such a cage.