Even high-profile investors are taking a stand. In April, billionaire Ray Dalio warned that the sanctions that squeezed Russia’s dollar currency reserves had "increased perception risk that these debt assets could be frozen the way they've already been frozen for Russia."
The Chinese currency has its moment as a potential rival to the US-dominated global payment system. China, in its efforts to expand the use of its currency abroad, has made deals with countries such as Russia. While it's not the only currency to challenge the greenback, the currency is the most prominent contender, given the US-China tensions, and Beijing's alliances with Russia during the war.
Green wrote on April 28 that the People's Bank of China had been cautiously promoting greater use of the yuan over the past decade without disrupting financial stability. It's unlikely this dynamic will change now.
Beijing will likely pursue its currency influence in countries that it actively trades with, rather than push for the yuan as the dominant global reserve currency. Green told Insider that Beijing is likely to focus instead on breaking up the dominance of the US dollar in certain parts of the world.
"Chinese capital controls have always been a possibility."Beijing aside, the question was whether the global environment would be supportive of this -- are there sufficient nations that will adopt the yuan? Abishur Prakash is the CEO of The Geopolitical Business in Toronto, an advisory firm.
The US will have to deal with ever-increasing deficits in order to maintain its reserve currency position. Yale economist Robert Triffin first presented this paradox to Congress in 1960.
As the global economy expanded so did the demand for reserve assets. The only way to supply these to foreigners was for America to run a current account surplus and issue dollar-denominated bonds to fund it, wrote Kemp.
Green wrote: "China is both politically unwilling and economically incapable -- barring structural reforms -- of running a sustained deficit in its current account and providing sufficient RMB assets to the global market.
Geopolitics and China’s economic weight is driving and will continue to push RMB adoption as a reserve currency and for trade. The RMB's increased use internationally will open up channels for the evasion of sanctions, but the dollar remains unaffected," wrote Green.
