Since the beginning of the trade war with China, the US position has been stronger than that of China. Even amid the pandemic, the US managed to stay afloat and the US dollar saved its dominance.
While some authorities are warning their citizens about the US dollar slump and massive dedollarization, figures are proving the opposite.
Thus, only in July 2020, the greenback accounted for almost 40% of all SWIFT transactions compared with less than 2% for the Chinese yuan. “China is disadvantaged in the sanctions game because its payment system is underdeveloped and yuan internationalization is decades away,” Edwin Lai, a Hong Kong University of Science and Technology economics professor, said.
The US also has the nuclear option of cutting China off from the US dollar system, which would leave China unable to conduct any transactions in dollars. Moreover, the US decision to move manufacturing out of China to the neighboring countries or to the homeland may lead to a massive job loss and bankruptcy.
Washington is still indulgent to China, but this could not last forever. The fact is that China failed to comply with a range of obligations that it should have fulfilled according to the “phase one” trade deal signed in January. China’s commitment was to increase the purchase of the US goods up to $200 billion by the end of 2020. Violation of the agreement may force the US to impose new sanctions against its trade partner.
