(MENAFN– The Conversation) China is increasingly becoming influential in what is now called the Global South. Over the past few decades, it has become the largest creditor to developing countries, raising concerns about “debt traps” and the establishment of a “hegemonic influence.”
China’s strong economy poses a challenge to the U.S. dollar and it is a key player in the BRICS+ group, which aims to create a multipolar world and challenge U.S. dominance. The U.S. government views China as its most significant long-term challenge.
The U.S. Dollar’s Dominance
The U.S. dollar underpins America’s global position, making up about 58-59% of central banks’ foreign reserves. Despite a decrease since 1999, trust in the dollar remains strong, supporting U.S. financing.
However, confidence in the dollar could wane because of the U.S.’s use of the dollar as a political tool and concerns over its significant debt, which has surpassed $33.4 trillion—nine times more than in 1990.
China’s Strategy
China has sold off $600 billion of U.S. debt since 2016 and is working to strengthen its own currency. It has increased its gold reserves significantly, now holding around 2,235 tonnes, which it uses to support its currency and replace some of its U.S. Treasury holdings with gold.
By promoting gold alongside the yuan through the Shanghai Gold Exchange, China aims to solidify the yuan’s position in global trade.
This article was originally published in French.
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