9 Signs That China Is Making A Move Against The U.S. Dollar

Tyler Durden's picture

While 20-year highs for the CNY may be enough for many to question the USD's ongoing reserve status, it is clear that there are many other plans afoot that undermine the dominance of the greenback.

Submitted by Michael Snyder of The Economic Collapse blog,

On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar.  You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely.  Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years. 

The Chinese would like to see global currency usage reflect this shift in global economic power.  At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars.  This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode.  And due to the recent political instability in Washington D.C., the Chinese sense vulnerability.  China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold.  All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.

Today, the U.S. financial system is the core of the global financial system.  Because nearly everybody uses the U.S. dollar to buy oil and to trade with one another, this creates a tremendous demand for U.S. dollars around the planet.  So other nations are generally very happy to take our dollars in exchange for oil, cheap plastic gadgets and other things that U.S. consumers "need".

Major exporting nations accumulate huge piles of our dollars, but instead of just letting all of that money sit there, they often invest large portions of their currency reserves into U.S. Treasury bonds which can easily be liquidated if needed.

So if the U.S. financial system is the core of the global financial system, then U.S. debt is "the core of the core" as some people put it.  U.S. Treasury bonds fuel the print, borrow, spend cycle that the global economy depends upon.

That is why a U.S. debt default would be such a big deal.  A default would cause interest rates to skyrocket and the entire global economic system to go haywire.

Unfortunately for us, the U.S. debt spiral cannot go on indefinitely.  Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable.

The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing.  In the aftermath of a U.S. collapse, China anticipates having the largest economy on the planet, more gold than anyone else, and a respected international currency that the rest of the globe will be able to use to conduct international trade.

And China is not just going to sit back and wait for all of this to happen.  In fact, they are already doing lots of things to get the ball moving.  The following are 9 signs that China is making a move against the U.S. dollar...

#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.

#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.  This agreement will result in a lot less U.S. dollars being used in trade between China and Europe...

The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.

"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."

#3 Back in June, China signed a major currency swap agreement with the United Kingdom.  This was another very important step toward internationalizing the yuan.

#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.

#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.

#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar...

There have been media reports this week that China's State Administration of Foreign Exchange, the body that handles the country's $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.

#7 Xinhua, the official news agency of China, called for a "de-Americanized world" this week, and also made the following statement about the political turmoil in Washington: "The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized."

#8 Xinhua also said the following about the U.S. debt deal on Thursday: "[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system".  The commentary in the government-run publication also declared that the debt deal "was no more than prolonging the fuse of the U.S. debt bomb one inch longer."

#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations.  But instead of slowing down, the Chinese appear to be accelerating their gold buying.  In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold.  There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?

It would change the face of the global economy almost overnight.  In a previous article, I described some of the things that we could expect to see happen...

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.

The fact that we get to print up giant mountains of money and virtually everyone around the world uses it has been a huge boon for the U.S. economy.

When that changes, the word "catastrophic" is not going to be nearly strong enough to describe what is going to happen.

According to a Rasmussen Reports survey that was released this week, only 13 percent of all Americans believe that the country is on the right track.  But the truth is that these are the good times.  The American people haven't seen anything yet.

Someday people will look back and desperately wish that they could go back to the "good old days" of 2012 and 2013.  This is about as good as things are going to get, and it is only downhill from here.


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Zer0head's picture

and the sign says:


slotmouth's picture

Is this buzzfeed or zh?

Xibalba's picture

one for them, one for us



works for Hollywood

knukles's picture

Easy to see what's going on.
Chinese tired of Uncle Sam's push, meddle, mess things up for everybody, world wide military adventures, hypocritical prognostications, etc.
What's the best way to get rid of Uncle?
Get the dollar off center as the reserve currency.
Then there'll be nobody left taking it by default (yuck yuck)
Other currencies take its place.
Which means demand for dollars falls.
Which means the US cannot finance its massive budget deficits.
Meaning it cuts back its global economic/military hegemony

No more problems from Uncle.....

Now that, my friends is the REAL Currency War.
Not the piddling and tweaking about the corners about devaluations, etc., etc., etc

And nobody in DC gets this... at least in the current power base or things'd be one hell of a lot different (Sane... Hell even Cruz's folks would be centerists... cut the spending because you got to becomes real time here and now....)


SafelyGraze's picture

"9 Signs That Democratic Freedom-loving Constitution-driven Open-market Faith-tolerant Rule-of-law China Is Making A Move Against The U.S. Dollar"

you gotta be kidding

only nine?

markmotive's picture

Go one step further and you could say that China is trying to 'De-Americanize' the world.


FMR Bankster's picture

Chess and us checkers? Actually they are playing go.

PP's picture

I can tell you most Chinese common citizens are critisizing (not wondering) that Government own so much US debt, even though they don't know what is US debt and how it functions. You can see numerous negtive comments followed with EVERY US dept news on Internet. 

We severely think that it is essential to lower US debt holding in China, otherwise when US defaults of depreciation dollar, there will be a war between two countries.

Thought Processor's picture

China holding US debt is smart at this point.  It gives China both a seat at the big table and it gives them leverage.  Leverage that can be used at any negotiating table China sit's at.  

And with leverage comes power.  Just as a bank has power over a borrower so China has power over the US.  

Perhaps a worthwhile investment when looked at in that context.


fockewulf190's picture

Not for nothing but this play by the Chinese has been obvious for some time already. China has not officially updated their gold holdings for years, even though thousands of tons have headed east.

Regarding the threat of war if the US defaults, the Chinese are quite aware of the track record for fiat currencies. They all fail. Every single fiat currency that ever existed has eventually devolved into extiction. 100% batting average. Why they believe it won't happen to the dollar, is beyond me. Actually, many of the Chinese public may not know what the deal is, but the Chinese government knows for sure that the dollar is doomed...which is why they are buying all the phyzz they can so that they can be the next reserve currency. They do not need war to become the strongest economic power in the world. They need gold...and they are getting it.

Lost My Shorts's picture

When gold was $300 per ounce, the Chinese were piling up paper.  Now they are trading the paper for gold at a 75% discount.  Better late than never, but this is not exactly the crescendo of a brilliant strategy.

Everyone hates the Bernank like Satan himself, but poor Ben was dealt a bad hand.  Sort of like a 2-3-4-5-7 after his predecessors had lost all the chips already.  If he had allowed a brutal deflation to occur, raising the value of all the Chinese paper, the Chinese would have licked their chops and more or less bought the USA.  They would have loved that.  Among all the bad choices Ben had, he decided the least bad was to trash the dollar, cut the value of the Chinese paper stack by two thirds, and force them to liquidate their dollars at a deep discount.  They hate that, and so they bitch non-stop.

The classic IMF advice to a banana republic that spends its way into a currency crisis is to devalue.  Not really advice; more like a command.  The USA is a banana republic that spent its way into a currency crisis, so ... devalue.

Sean7k's picture

Zionists are never dealt a bad hand, they are the holders of the deck. There is no battle here, there is merely a manufactured means to an end: global slavery through debt, held by zionists. Bernanke is just another whore of babylon. 

jbvtme's picture

much ado...chinese and american yellow and white rothschild sock puppets. the only question is whether the genetically modified melamine milkshakes will be priced in dollars or yuan

Lost My Shorts's picture

Not sure about that ... I thought the joke was:  borrow a million and the bank owns you; borrow a trillion and you own the bank.

On the other hand, dollar reserve currency status has been on balance a curse, not a blessing to the US.

-- shipping all our jobs to china while they pile up T-notes has been a curse, not a blessing

-- enabling the run-away government deficit has been a curse, not a blessing.

-- enabling costly perverse global empire has been a curse, not a blessing.

Ending dollar reserve status will be a blessing, not a curse.  Our government will need to stay within its means.  We will get our jobs back.  No more boondoggle foreign wars.  Please bring it on.  The problem is really the opposite -- it won't happen soon enough.  Think about it.  Would you trust the Chinese government to redeem your yuan for gold?  Big nose have small brain if big nose fall for that one, ha ha.

flapdoodle's picture

It may be a blessing longer term, but there is a horrendous woar between there and where we are now... as for being a curse now, not so for TPTB, as it has enhanced their power and fortune, while creating a false sense of plenty in the US and the sheeple contented.

Marco's picture

It's not a pure curse for competetiveness/jobs ... the cost of wages is higher due to the overvalued dollar, but the cost of physical inputs is actually lowered.

A lot of the most productive industries in the US rely on the latter, when it dissappears it's going to cause pain.

Wahooo's picture

Exactly right. China has no interest in defeating the U.S. and pushing it into economic oblivion. There is a lot of negotiating leverage they will gain by strengthening their currency.  So as we approach the Yuan Hour, expect the U.S. to give away Taiwan and to have a few words with Japan about those silly islands, not to mention opening up our domestic assets to M&A approval.

jerry_theking_lawler's picture

the .fed will be wanting to buy this debt very soon.....at a nice premium with freshly minted bennie (i mean jannie) bucks....

Thought Processor's picture

The dollar will continue to decline in value.  No surprise there.  Simple supply and demand.  There is an oversupply of dollars sloshing around the world at the moment.  One theory of the FED's actions says that they are simply an effort to soak up excess dollar supply via debt purchases with the ultimate objective being the retirement of that debt outright at some point.   If so FED bond buying will continue uninterrupted.  

They have no choice.  Too many dollars on the market would throw everything out of whack.  That said this article hits it on the head, in that when others around the world decide en mass to move out of the USD the FED will have a real problem on its hands.  The trickle will become a flood.  

The US has its back up against the wall.  And is cornered as well.  The US exported inflation to the rest of the world for decades and printed enough US Dollars for all major countries to use.  Now its simply pay back time.  A rebalance of sorts.  Only problem is that when the dollar homecoming comes (already begun), it will not take decades.   There in lies the problem and the real issue at hand-  Sharp adjustments in economic status breed instability.  Instability fosters unrest.  Unrest fosters upheaval.  Hence all the talk of the great reset shock to come (mostly for the US).

Look at the balance sheets of the world's key players and it becomes clearer:  The balance sheets of the US, Europe, and Japan (Leading western economies) are all in the danger zone, having used up their resources and having squeezed all the blood from their longstanding monetary regimes all of which are at the end of their lifespans.  All need a reset war badly.  Conversely China, Russia, and Iran all have stellar balance sheets and as a group perhaps even have resources to spare.  Their economies, while certainly not perfect are in much better shape than the Western Ruling powers.

The US has it's military.  A certain advantage in any reset war.  It remains the big dog on the block as long as it is funded amply.

This is the game table as it stands.  

To those with means (real money) the currency game is a sideshow.   The true elite of this world could care less who's countries money their assets are denominated in, they only want stability of exchange for major currencies around the world so that they are free to move where needed, when needed.

Almost all Central Banks around the world report to the BIS and those that run the BIS will do anything to maintain the stability of currency exchange at the international banking level.  The real elite do not care who wins this in the end.  Real assets will always be assets.  Money will go to wherever it needs to go to acquire assets that maintain their value or provide a return.  Money doesn't care what form it takes, as it is only a transitory exchange device for real assets.

Change is coming.  How fast is anyone's guess.  

Those with enough funds to bank internationally will simply move their chips around and trade one asset for another.  Same as it ever was.

We the people will certainly feel it though.  For we long ago gave up control of our own affairs.  And that control was given to those who care not for people, but for assets.

And therein lies the irony.


zhandax's picture

There is an oversupply of dollars sloshing around the world at the moment.

Is there really?  If that were true, the DX wouldn't keep hanging around 80 during the largest dollar debt expansion in history.  I agree with the oversupply of dollars, but sloshing around excess reserve accounts, shadow banking, ICE, and nasdog is not immediately or exactly the same as 'around the world'.  I will agree the US has its back against the wall and is cornered, but not for the same reasons.  The US has to provide a sufficient supply of dollars to meet the funding needs of a bankrupt European banking system.  This is accomplished by either supplying new dollars, or allowing the existing dollar stock to increase in value.  The US no longer produces enough real output (goods) to allow (or afford) for the dollar to strengthen.  And it can no longer grow GDP fast enough to keep up with new dollar supply via debt.

Add in that the largest single US GDP contributor now is the FIRE industry and bankers don't make much money by allowing a stronger dollar to grease the global wheels of commerce; they make their killing from debt (collecting interest on it, trading it, re-hypothecating it, etc).  So the US is well and truly screwed, but it is an entirely self-inflicted wound.  The Chinese understand this and are making all possible moves to allow the victim to bleed out and be ready to fill the void.

Bioscale's picture

The interest rates are fake and too low, they cannot fix this, they are going to increase, rather sooner than later for some reason.

They can play the game about dollars scarcity for some time, but not for long. They have shown all their cards. Maybe I'm wrong but I think that a lot of people around the world have got it, beside american people. They will suffer the most.

Dubaibanker's picture

The case for Chinese Yuan as an Alternate Currency to the USD.

There are many more signs......You can have a look here...http://www.slideshare.net/mnathani/understanding-the-coming-domination-o...

A snapshot of what the Chinese have accomplished over the last 2-3 decades. It is really mindblowing if we add everything together.

Milestones's picture

Knukles-well thought out post.My lords the when this happens (not if) it will hit like a 9.5 quake in this world. Thank Gawd I'm getting long in the tooth but I am pissed for my grandchildren. Time to redo the Joan of Arc thingy.               Milestones

Milestones's picture

Knukles-well thought out post.My lords the when this happens (not if) it will hit like a 9.5 quake in this world. Thank Gawd I'm getting long in the tooth but I am pissed for my grandchildren. Time to redo the Joan of Arc thingy.               Milestones

Duplicqte post-sorry

Antifaschistische's picture

I have an idea...who said the world needs a Reserve Currency!   Using any rationale purely economic concept, why would storing pieces of paper to store wealth be a good plan?

Sure...I understand why every counterfeiter has an incentive to keep people interested in that which they create.  So, governments will continue to want to replace the US Counterfeit Fiat Dollar with their own Counterfeited Fiat Currency.  I can't blame them for that of course...but the world does not need paper storage wealth

BeanusCountus's picture

Who says the world needs a reserve currency? Well that would be the USA. As long as its the US dollar. And we will protect it at any cost. Because without it, we cannot spend beyond our means and continue to buy more from the rest of the world than we produce. Self preservation at this point. Can't say when it will end, but it will.

zhandax's picture

Only for the last 75 or so years.  And think of it more as a habit as a need.  For much of history, there was one currency or other that, during that time period, was commonly accepted by a large number of other country's merchants for trade.  So if supplier X in one country wanted to sell to buyer Y in another country and neither country did enough business with each other for there to be a supply of the others currency available, they used a common currency to facilitate trade.  Since that common currency was so prevalent, it is now regarded as the reserve currency of that era.  Witness Tyler's chart the other day of how long a reserve currency typically lasts.  The term 'reserve currency' is a fairly recent addition to the vernacular.  But the custom, or habit, has been around for centuries.  It has become superfluous in the last 10 or 15 years, but old habits die hard, and since the US walked out of Breton Woods as the reserve currency, and later got Saudi commitment to the petrodollar, the US has done everything in their power to insure that one habit is harder to kill than Bronx cockroaches.

Socratic Dog's picture

I think you missed a key point, that when the yuan becomes the reserve currency, it won't be fiat, it will be gold-backed.  That means you can freely exchange your currency for gold at a fixed rate.  Same as it once was for the $US.  As I understand it, anyway.

Wahooo's picture

Well, you can trade Yuan for gold, of course the US dollar will be so devalued that you won't be able to afford gold. Might be a good time to buy some Yuan.

Sean7k's picture

The Yuan will NEVER be gold backed. That is a bad strategy and even China knows it. Countries merely bleed your supply to the point where you end gold payments ( think Nixon). Zionists make money from leverage,hypothecation and debt interest. This is not possible with gold backing. 

Taking advantage of a global slave force requires paper money, controlled media and entertainment, and political division. Much like this silly argument.

layman_please's picture

jim willie has a take on it by which you are right about renminbi not being backed by gold but according to him there will be gold trade settlements.

Sean7k's picture

There already are gold trade settlements (Iran, Pakistan, India, etc) whatever it takes to get around sanctions (black markets).

I would suggest gold will be part of a basket of resources that back the SDR as a global reserve currency. Gold will either be seized as part of the national treasure needed to guarantee access to trade or forced collateral through windfall tax agreements that allow you to make a guaranteed return.

Zionists will never let goyim get wealthy through gold appreciation. Since most people have zero gold, what will it matter to them? People still believe markets matter- the central banks have clearly destroyed that argument.

Lacking a revolution that terminates the currency systems and central banking, recreates free media and decentralizes power structures, the chains will just get stronger and lighter- benevolent slavery.

Tyranny is pretty basic stuff.

q99x2's picture

I think Washington D.C. globalists plan to make money by attacking the US. That is what they have been doing. Why would they stop?

I mean they made China what it is today. I started out in life as a machinist. Then a network engineer. I finally took up dog walking because I didn't see how they could ship that job to China. Then competition became so severe from laid off Hispanic construction workers and illegal immigrants that I went back to college.

Now I go to college for a living.

DeadFred's picture

You clearly lacked in marketing skills. How many people want a dog with a spanish accent? That alone should have kept you and your pooper-scooper active. My wife's boss once took her young child to work but the child seemed pretty dull. "Caroline, come over here" got no response, just a blank look. That's until one of the workers (who had met the nanny) got her to respond with "Caroline, venga aqui".

Socratic Dog's picture

When the reset comes you'll be back as a machinist.  A skill that will be very sought after when we can no longer import anything and everything.

zhandax's picture

For about three weeks and then he will have 100 people to train.

Winston Churchill's picture

Only if he is a toolmaker.

Mass repitition machinists died with cnc machines.

Many lifetemes ago I made my own tools for my engineering biz. when I had the time.

Like all skills unfortunately, they atrophy over time and cannot be be book learned..

Wahooo's picture

Forget the college. At this point go hire 20 of those immigrants and market yourself as the 7x24 dog sitting/walking agency. Be the boss.

10mm's picture

People in D.C. get this. They just perpatrate a fraud. A collaboration of many.

Gamma735's picture

The currency war is always just a prelude to world war.

Keyser's picture

It's not as if China is doing anything to cause the USD to die. The numpties in Washington are doing a fine job of that without any outside assistance. 


DanDaley's picture

And nobody in DC gets this... at least in the current power base or things'd be one hell of a lot different.

Unless Obama and Co. think that its better to serve in hell (rule a Zimbabweian POS banana republic) than to serve in heaven (follow the Constitution and do what's right to your own citizens and other countries).


The Obama Doctrine looks like this: Drive a beat up old Cadillac, just make sure that everybody else is running around in ox carts.


Eeyores Enigma's picture

"...and when the RADIOACTIVE dust settles they plan to be the last ZOMBIES standing."


They will pry reserve currency status from our cold dead hands.

Just saying!

unununium's picture

Optimists, don't make the mistake of thinking that dethroning of the US dollar means anything bad for the American and European elite.  China and the USA are both pawns, ref. Tyler's chart for the long and regular line of globar reserve currencies, played out like so many stages of a booster rocket.

And don't take your eyes off bitcoin.

zorba THE GREEK's picture

Some day soon, the biggest holiday in the U.S. is going to 

be Chinko De Mayo.

zhandax's picture

Damn, zorba, I almost choked on that one

Demonoid's picture

Gold is money.

FRNs are currency.

As with a man, only crisis can reveal the true character and worth of each.

kevinduhand's picture

Just No. China is never gonna blow up the system

runningman18's picture

How many ways do the Chinese have to say they are going to dump the dollar before people listen?