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The confrontation between the United States and China is gaining momentum

The dominant position of the dollar gives the US an advantage in the confrontation with China

In recent months, the Trump administration has imposed sanctions on a dozen Chinese officials.

In July, the dollar accounted for 40% of SWIFT transactions, while the yuan accounted for only 2%.

“China has few tools at its disposal to impose sanctions because the US payment system is very widespread in the world,” says Edwin Lai, professor of economics at the University of Hong Kong.

“China is lagging behind in terms of imposing sanctions, as its payment system is not very developed and the yuan is not yet internationalized,” he adds.

The United States imposed sanctions on 24 Chinese companies over suspicions of forming military bases in the South China Sea.

In addition, the US could cut China off from the dollar system, said Ding Chuang, chief economist for China at Standard Chartered Plc.

Beijing, in turn, could sell US Treasuries or block the export of rare minerals and key manufacturing components.

China needs to open its own capital account and encourage more widespread use of the yuan, said Scott Kennedy, an adviser at the Center for Strategic and International Studies.

However, this will provide an opportunity for foreign investors to influence the RMB exchange rate.

Google News
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