The global economy is inexorably moving towards a multicurrency system as China’s persistent efforts to internationalise the yuan and technological changes erode the US dollar’s dominant position, economists said at a conference on Monday.
“Trade invoicing in yuan went from zero per cent to 30 per cent in the last 10 years, and half of Chinese capital flows are now in yuan, much higher than before,” said Jin Keyu, a professor at the London School of Economics, at a panel hosted by the Milken Institute, a US-based think tank.
“The truth is that there has been a slow decline of the dollar in the data, and the non-conventional reserve currencies – even outside of the yuan – have jumped from 2 per cent to 11 per cent,” she added, noting there is “consensus” among economists that the world is heading towards “multicurrency equilibrium” over the long term.
The emergence of alternatives to the widely used Society for Worldwide Interbank Financial Telecommunication (Swift) payment system is a “massive undercurrent” that is accelerating the process of financial diversification, Jin said, adding that the significance of this development was underappreciated.
Several new payment systems have gained traction over the past few years, including mBridge – a central bank digital currency platform built using blockchain technology – and the Chinese-designed Cross-border Interbank Payment System (CIPS).