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Yuan poses threat to greenback

Stratfor, an American geopolitical intelligence platform, expressed an opinion that the main goal of the United States for 2019 is opposing China’s Belt and Road Initiative. The project is aimed at creating a single zone of transportation routes that would connect Europe, Africa and Asia. But in fact China, America’s major opponent, intends to gain access to the global natural resources. Having closely examined the possible scenarios, Stratfor’s analysts concluded that this project can challenge the dollar’s dominance. Here is a bit of history. In 1979 the United States and the PRC established diplomatic relations. A number of trade privileges became available to Beijing under the condition that it uses only the US dollars in international settlements. Thus, this event provided significant support to the greenback, having raised its status of the world’s reserve currency. As a result, the Bank of China’s dollar holdings surged from 2.26 billion to almost 4 trillion dollars in the period from 1979 till 2014. Approximately at that time the idea of a “one road” evolved.

Following the suit of developed countries, China started to provide loans to less prosperous countries that possessed natural resources. These countries received money and spent a part of it to buy the Chinese gold. They were obliged to keep the gold at the state Chinese banks. Thus, Beijing copied the policy of the Federal Reserve and the Bank of England that also demanded that their borrowers keep gold in the banks’ vaults. In fact, the Chinese program is gathering pace. The media has already compared it to the US Marshall Plan.



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