(MENAFN – The Conversation) China is rapidly becoming a key player in the Global South, previously known as the Non-Aligned Movement. Over the years, it has become the largest creditor of developing nations, leading to concerns about potential dominance through a “debt trap.”
China’s strong economic position is now seen as a significant challenge to the U.S. dollar. As a member of the BRICS+ group, which includes Brazil, Russia, India, and South Africa, China is pushing for a multipolar world that counters U.S. hegemony.
The U.S. government views China as a “serious long-term challenge” to the global order, particularly regarding its ambitions to diminish the dollar’s supremacy.
The U.S. dollar’s dominance is crucial for American global power, as noted by French economist Denis Durand. Its over-representation in global reserves highlights its continued importance, even with a slight decline over the past two decades. Currently, the dollar constitutes about 58-59% of global reserves.
However, this dominance may be fragile. The U.S. has been using its dollar power to exert influence, which could erode trust in it. Additionally, concerns over rising U.S. debt could impact the dollar’s status as a reserve currency.
Since 1944, the dollar has been central to international finance, bolstered by the Bretton Woods Agreement. After 1971, when the dollar was uncoupled from gold, the U.S. debt skyrocketed; by 2023, it exceeded $33.4 trillion.
Recognizing the risks associated with U.S. debt, China has sold off a large portion of its U.S. bonds—$600 billion since 2016. From being the largest holder, it now ranks second, with around $816 billion in U.S. Treasuries.
China’s strategy also involves reinforcing its currency through gold. It launched a gold pricing system in yuan and has been increasing its gold reserves significantly—now totaling 2,235 tonnes, making it the sixth-largest holder globally.
By diversifying assets from dollar to gold, China aims to strengthen the yuan’s position and promote its use in international trade, positioning itself as a formidable economic player.
This article was originally published in French.
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