🔴 CHINA Is De-dollarizing: China Launches $1.2 Trillion Digital Yuan System, Bypasses Western SWIFT

Welcome back everyone. I hope you're doing well. Thank you so much for being here. If you're new, please make sure that you are subscribed to worldaffairsandcontext.com for the latest updates and consider supporting my work. It is very much appreciated. In one of the biggest blows to the Western-led financial system, the People's Bank of China just set the stage for a new Bretton Woods 2.0 system. In a quite shocking turn of events, nobody was really expecting this. The People's Bank of China announced the full integration of its digital renminbi, which is commonly known as the digital yuan, into the cross-border settlement system of all 10 ASEAN nations. As you may know, ASEAN stands for the Association of Southeast Asian Nations. And it actually didn't stop there. The new technology architecture integrated the digital yuan with six Middle Eastern countries. This means that more than 38% of the world's trade volume will now bypass the SWIFT system, which as we know is denominated by the US dollar. And yes, it does mean that the trend to de-dollarize is going strong. Now, if you still think that talking about de-dollarization is very much anti-American, I want to refer you to a recent video that I uploaded where I walked you through an article published by Financial Times speaking about de-dollarization and the impact of US foreign policy on driving foreign nations to de-dollarize. I will link that video below if you would like to watch it next. It is very, very informative. Now, given that ASEAN nations are China's largest trading partner, this is a very important development in the process of de-dollarization of global markets and also creating alternatives to Western-led structures. This is, of course, not surprising in the multi-polar world. It is to be expected. Countries now recognize that having alternatives, especially when it comes to economic sovereignty, is a matter of national security. Remember that China's Belt and Road Initiative, which is effectively an economic and policy tool, will likely work hand-in-hand with this new digital renminbi platform. The two frameworks seek to boost trade, they seek to enhance investment, cooperation, and is effectively a win-win as economic development may transform over time into a foundation for tackling security concerns collectively, for creating long-lasting alliances, and peace building. The People's Bank of China aims here to accomplish two goals. One, it wants to amplify financial connectivity of global markets by creating alternative settlement channels that do not rely on the pure political will of Western powers. And two, the integration here enhances the use of the Chinese currency, the renminbi, which may lead to participating countries effectively shifting away from the US dollar since its fluctuating exchange rate traditionally adds considerable cost to transactions which then have to be absorbed by foreign nations. And this is even without taking into consideration any associated geopolitical challenges such as Western coercive measures in the form of sanctions and trade restrictions. According to reports, the new digital platform compressed the settlement time of transactions to just seven seconds, while the SWIFT system may take anywhere between three to five days to settle. In the first test that was done between Hong Kong and Abu Dhabi, a company actually paid a Middle Eastern supplier through digital renminbi. The funds no longer went through six different intermediary banks as they would under the SWIFT framework, but were actually received in real time through a distributed ledger. And so, of course, the handling fees dropped. They dropped by 98%, according to reports. China's integration of the digital renminbi into the cross-border settlement system of ASEAN nations is a truly pivotal step in the evolution of regional financial systems and in the de-dollarization process globally. The integration with ASEAN countries is a winning geostrategic move that will further position China as the regional great power, which it already is, but it will enhance its role regionally, and it will also boost its long-term economic position, because as the access to the digital yuan is simplified via these new structures, the demand for it will also naturally increase over time. It has been over a year since the People's Bank of China started to prioritize the infrastructure for the use of digital yuan. This has been in the making for a long time, as China continuously appeared to focus on its economic sovereignty and also on the decreasing role of associated quite volatile and largely unpredictable Western partners. So, it is absolutely not surprising that China launched this system now. The move to create a common financial settlement platform with the ASEAN is a truly strategic move because it will focus on three areas. First, it will bolster China-ASEAN cooperation as it makes foreign direct investments and trade flows that much more streamlined. Second, it will also encourage ASEAN nations to use the yuan regionally, which will of course enhance their dependence on China and its policies in the future. So, it does create dependencies quite literally. Third, there is a pilot free trade zone where the digital yuan payments will be implemented to further encourage trade among these nations. So, again, shifting the focus to ASEAN nations rather than Western counterparties is a great move by China that will further strengthen its role as a regional power. Trade between China and the Association of Southeast Asian Nations has experienced significant growth over the past decade. In 2022, the trade volume reached approximately $975 billion, a 120% increase from 2013. It marked ASEAN as China's largest trade partner. In the first five months of 2023, trade between China and ASEAN amounted to 2.6 trillion yuan, which is equivalent to $400 billion, accounting for 15.4% of China's total foreign trade during that period. So, hopefully that gives you an idea what this means and it helps you quantify just how big of an impact this move actually makes. As a side note, since I typically receive these questions in the comments, this move by the People's Bank of China, the establishment of the new platform to use the digital renminbi in cross-border settlements, this has nothing to do with the value of gold because the U.S. dollar is not backed by gold. The decline in demand for the U.S. dollar over time will eventually happen, of course, but it will not be substituted by gold in any case. So, the integration points to currency multipolarity. That's what it means. It doesn't point to the fact that we now need to rush to purchase gold. I keep receiving these questions in the comments below and I just want to make a point that this doesn't mean that you need to buy gold. It just means that over time the demand for the U.S. dollar will decrease, as we know very well, and this is yet another move towards currency multipolarity. This simply means that the introduction of multiple currencies in global investments and in global transaction settlements, which is very much aligned with the BRICS plus long-term goals, is ongoing and it is quite aggressive. All in all, the introduction of the new digital settlement platform by the People's Bank of China promotes the use of renminbi in cross-border trade and long-term partnerships that require foreign direct investments. It enhances the region's financial infrastructure as well as it just really improves the resilience of regional economies over time. And finally, one more note to make here. The new system serves as a strong link between regional players in Asia-Pacific and it seeks to increase cooperation, which will also increase peace-building initiatives in the long run. Without a doubt, the new digital system is yet another step towards de-dollarization, which we know very well, is only encouraged by instability, by continued threats and tariffs that are ramping up as we speak. I believe the timing of this announcement is very important too. It came just when President Trump launched new tariffs on many foreign nations. The launch probably was designed as a show of force by the United States to show that it does have the economic power that it once had, but in reality it ended up being a substantial domestic and international pain as the reaction to these tariffs has been anything but beautiful, using Trump's favorite word. So, thank you very much for watching. Make sure that you are subscribed to worldaffairsandcontext.com for the latest updates. Remember to show your support, like, subscribe and share. It goes a long way, it means a lot to me. And I will see you back here tomorrow. Enjoy the rest of your day. Bye for now.