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Why the Renminbi Won’t Rule

As the US retreats from the world stage and a multipolar global order emerges, the international monetary system may well be transformed – but probably not into a renminbi-led system. Indeed, not even China expects the age of renminbi diplomacy to arrive anytime soon.

TOKYO – In the dystopian fantasy Blade Runner 2049, Los Angeles 32 years from now looks a lot like China’s megacities today: grey, polluted, and dominated by tall towers emblazoned with flashing neon advertisements. The viewer never learns much about the outside world, much less in what currency the advertised goods are traded. Is the US dollar still dominant, has the Chinese renminbi taken over, or has some other currency surged to global preeminence?

US President Donald Trump seems intent on ensuring that America retreats, at least partly, from its global leadership role. But, as was the case with the British pound in the interwar period, a currency can remain globally dominant even after its issuing country loses its economic, financial, and geopolitical hegemony. Today, too, the world should expect the US dollar to remain the key reserve currency, used to invoice and settle international trade, for a long time to come.

But, in terms of international financial diplomacy, the dollar’s position may not be as secure. The question is whether the end of “dollar diplomacy,” which the economist Barry Eichengreen predicts, will necessarily mean the rise of renminbi diplomacy.

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