US Holds Rates, Yuan Advances, 44 States Seek Currency Autonomy, Musk Warns
With the steady growth of China's economy and the continuous expansion of its opening up to the outside world, the status of the Renminbi (RMB) in global trade finance has significantly improved.
In 2024, the RMB exchange rate against the US dollar increased by more than 1600 points, ranking it as the second-largest currency in global trade finance for two consecutive months.
This change not only reflects the market's confidence in the RMB but also indicates that the process of RMB internationalization is accelerating.
While China is promoting high-quality economic development, it is also actively advancing the diversification of trade and investment, leading to an increasing use of the RMB in international trade.
According to data from the State Administration of Foreign Exchange, in the first half of 2024, China's trade surplus in goods reached 288.4 billion US dollars, and the total import and export volume was as high as 21 trillion RMB.
The growth of these figures provides strong support for the stability of the RMB exchange rate.
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Secondly, with the fluctuation of US economic data and the strengthening of market expectations for the Federal Reserve to cut interest rates, the US dollar exchange rate has declined, providing room for appreciation of the RMB.
It is expected that after the Federal Reserve announces a rate cut, the US dollar exchange rate against the RMB may fall further, which will help to enhance the status of the RMB in the international market.
Against the backdrop of increasing global economic uncertainty, China, as the world's second-largest economy, has a stable and predictable monetary policy, making the RMB a choice for more countries and investors.
At the same time, China's monetary cooperation with other countries is also continuously strengthening, which will further promote the role of the RMB in the international financial system.
The phenomenon of 44 states in the United States pursuing monetary independence is not only a shaking of trust in the US dollar but also a profound reflection on US economic policy.
The internal currency independence movement in the United States reflects concerns about the decline in the purchasing power of the US dollar.
As predicted by the US Congressional Budget Office, the public health insurance, hospital insurance, and social security funds in the United States are also expected to be exhausted in about 10 years, which undoubtedly intensifies doubts about the stability of the US dollar.
In addition, residents in many cities across the United States have to bear an average debt burden for themselves, their cities, or states, and also bear a high additional debt cost for the federal debt total, leading some wealthy individuals in states or cities to choose to flee, staging a real-life "Exodus."
The economic and political motives behind this movement are complex.
On the one hand, the US federal deficit spending is out of control, and the interest cost of federal debt has already broken through 1 trillion US dollars, which seems to be becoming a more urgent task for the Federal Reserve than dealing with inflation.
On the other hand, the concerns of US Treasury Secretary Yellen also indicate that the US economy can no longer get rid of its dependence on debt, and this dependence has weakened the credibility of the US dollar to a certain extent.
The impact of the internal currency independence movement in the United States on US economic policy is multifaceted.
It may not only weaken the international status of the US dollar but also force the US government and the Federal Reserve to re-examine and adjust existing monetary policies.
Tesla CEO Elon Musk has warned that the United States is on a fast track to bankruptcy.
He pointed out that excessive government spending is the primary cause of inflation.
This view echoes the relevant data of the US Treasury Department, which shows that the scale of federal government debt has already broken through 35 trillion US dollars, and is estimated to reach 50 trillion US dollars by 2034.
The growth trend of the US government's debt and the fiscal deficit situation have brought potential risks to the US economy.
Along with the continuous accumulation of debt, the US government's interest expenditure is also on the rise, which may squeeze investment in other key areas such as infrastructure, education, and scientific research.
In addition, a high level of debt may also limit the policy space of the government in dealing with future economic crises.
In dealing with the issue of debt growth and fiscal deficits, the US government may need to take a series of measures.
These include but are not limited to increasing taxes, cutting spending, and reforming welfare programs such as social security and medical insurance.
At the same time, promoting economic growth, improving productivity, and innovation capabilities are also key ways to solve fiscal problems.
After a series of economic adjustments in the United States, the US dollar exchange rate against other currencies has declined, while the RMB has shown a strong counter-offensive momentum.
This change reflects the market's confidence in the RMB and also indicates that the process of RMB internationalization is accelerating.
According to data from the International Monetary Fund (IMF), the RMB has become the second-largest currency in global trade finance, and this status has been obtained thanks to China's robust performance in the global economy and continuous industrial upgrading.
As a global trade power, the growth of China's total exports and imports provides a solid foundation for the internationalization of the RMB.
Secondly, China's position in the global financial system is becoming increasingly important.
With the advancement of RMB internationalization, the proportion of RMB used in international payment settlement is gradually increasing.
China has been promoting the internationalization of the RMB in various aspects, including developing cross-border payment systems, expanding swap arrangements, and piloting central bank digital currencies.
Changes in the global economic situation, especially adjustments in US monetary policy, may have an impact on the RMB exchange rate.
Although the Federal Reserve's interest rate hike policy supports the US dollar in the short term, in the long term, the trend of diversification in the global economy may weaken the dominant position of the US dollar.
In this context, China needs to continue to promote high-quality economic development, strengthen the opening and innovation of the financial market, to cope with the uncertainty of the global economy.
It also needs to strengthen cooperation with other countries to jointly maintain global financial stability and promote the sustainable development of the global economy.