In recent years, especially after the Russia-Ukraine conflict in 2023, a global discussion and action to reduce dependence on the US dollar has emerged, known as "de-dollarization." Central banks in many countries are increasing their gold reserves, promoting trade settlement in their own currencies, and the idea of an emerging market currency union are challenging the dollar hegemony system established since World War II.
I. Phenomenon Observation: Cracks in the Walls of Dollar Hegemony
For decades, the US dollar, as the world's primary reserve currency, medium of exchange, and unit of account, seemed to hold an unshakeable position. However, recent developments indicate that this pattern is quietly changing.
1. Diversification of Central Bank Foreign Exchange Reserves: According to data from the International Monetary Fund (IMF), the share of global dollar foreign exchange reserves has fallen from over 70% at the beginning of this century to approximately 58% in 2023. At the same time, central banks, especially those in emerging markets, are increasing their gold reserves at a record pace. This is seen as a direct measure to diversify risk and reduce dependence on dollar assets.
2. A Surge in Bilateral Local Currency Settlement Agreements: China has signed more agreements with resource-rich countries such as Saudi Arabia, Brazil, and Argentina to use their local currencies for trade settlement. Russia has almost completely shifted to using the ruble or other non-US currencies in trade with friendly countries. India is also exploring rupee trade mechanisms with several countries. These actions directly bypass the US dollar payment system (such as SWIFT).
3. Exploration of Regional Financial Architecture: The BRICS countries are actively discussing the possibility of establishing a common payment system and reserve currency. Although facing many challenges, this reflects the dissatisfaction of major emerging economies with the existing dollar system and their desire to seek alternatives.
4. The US Debt Ceiling Crisis and the Weaponization of Finance: The recurring debt ceiling crisis in US domestic politics has weakened global trust in the "absolute safety" of US Treasury bonds. At the same time, the US has "weaponized" the dollar system, using extreme sanctions such as freezing Russia's foreign exchange reserves, which has made many countries wary, fearing they might become targets in the future, thus accelerating "safe haven" preparations.
II. Underlying Motivations: Why Does the World Want to "Leave" the Dollar?
This wave is not unfounded; it is underpinned by profound economic, political, and strategic considerations.
1. The Explicit Manifestation of Geopolitical Risks: The dominance of the US dollar grants the United States enormous geopolitical power. When this power is frequently used for sanctions, it generates a backlash, prompting sanctioned countries and even neutral nations to seek alternative financial "lanes" independent of the US.
2. Concerns about US Macroeconomic Policies: To combat inflation, the Federal Reserve's aggressive interest rate hikes have led to a stronger dollar, causing capital to flow back to the US from emerging markets, exacerbating these countries' debt burdens and imported inflation. Countries realize that their domestic economic policies are largely constrained by the Fed's decisions, and the side effects of this "dollar cycle" are unbearable.
3. The Inevitable Requirement of a Multipolar Global Economic Landscape: The rise of economies like China and India has significantly increased their share of global trade and investment, but this is disproportionately matched by the low share of their currencies in international finance. The decentralization of economic power naturally necessitates a redistribution of monetary power.
4. Empowering Technological Development: Digital currencies (such as China's digital yuan) and new cross-border payment systems (such as China's CIPS) offer technological possibilities for bypassing the traditional dollar clearing system.
III. Prospects and Challenges: The Dollar's Throne Remains Unshakeable in the Short Term
Despite strong calls for "de-dollarization," it is premature to assert that the dollar is about to lose its hegemonic status.
1. Strong Path Dependence and Network Effects: The dollar possesses the deepest financial markets (the US Treasury market is the deepest and most liquid globally), the widest acceptance, and the most comprehensive financial infrastructure. Switching to another currency is extremely costly and requires global coordination, making the formation of new network effects very difficult.
2. Lack of Qualified "Alternatives":
· Euro: Faces structural problems such as sovereign debt crisis, internal political instability, and energy dependence.
· Renminbi: Capital account not fully open, financial market depth and transparency still need improvement, and it is constrained by geopolitics.
· SDR (Special Drawing Rights): Only a unit of account, not a transaction currency.
• Gold: Inconvenient for daily transactions and payments.
3. America's self-correcting ability: The innovative capacity of the US economy and technology, as well as the resilience of the dollar system, remain its strong moat.
Conclusion: The current wave of "de-dollarization" is more accurately described as the beginning of a "multipolar monetary system." It does not aim to immediately overthrow the dollar, but rather to gradually erode its monopoly and establish a more diversified and resilient international monetary system. The more likely future scenario is that the dollar, euro, renminbi, and other currencies will each play a more important role in different regions and sectors, forming a "multi-currency" coexistence pattern. This process will be long and tortuous, but its direction and impact will undoubtedly be profound, reshaping the global financial landscape for decades to come.
