The fundamental reason China will struggle to dethrone the dollar

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Last week's Brics summit is disappearing in the rear-view mirror and with it, mercifully, some of the wildly unrealistic discussion of a new currency issued by the grouping's five emerging market members — aimed at dethroning the dollar.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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31 Aug 2023

Last week’s Brics summit is disappearing in the rear-view mirror and with it, mercifully, some of the wildly unrealistic discussion of a new currency issued by the grouping’s five emerging market members — aimed at dethroning the dollar.

Policymakers watching challenges to the greenback’s global dominance can return to the more realistic challenge from an existing currency, the Chinese renminbi. While European governments have envied the dollar’s international role since the 1960s and hoped in vain that the euro would supplant it, Beijing’s bid has emerged rapidly and for a more pressing reason, as the US weaponises the dollar. But it will encounter serious difficulties from China’s fundamental problems — which are different from Europe’s traditional weaknesses but, if anything, more deep-seated.

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