November 26, 2020

A Financial Alliance Won’t Help China and Russia Dethrone the US Dollar

By ​Francis Shin

Since 2014, China and Russia have sought to drastically reduce their reliance on the U.S. dollar to mitigate the impact of any U.S. coercive economic action against them. The two countries want to create a new alternative financial system outside the oversight of the United States, which has jurisdiction – and power – linked to every user of dollars in the world. Nonetheless, the deck is stacked against Russia and China’s goal.

The U.S. dollar has the incumbent advantage in facilitating global trade.

Notwithstanding their progress in de-dollarizing bilateral trade, China and Russia are unlikely to succeed in building a global de-dollarized coalition to avoid sanctions. This is because the U.S. dollar has the incumbent advantage in facilitating global trade. The dollar is also more stable than the Chinese renminbi (RMB) and Russian ruble, and China-Russia relations are not as strong as they appear.

Read the full article in The Diplomat.

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