Newsan is one of Argentina’s biggest home appliance retailers. For decades, it settled its payments in U.S. dollars for the goods it bought from China, such as fridges and TV sets. In April, Newsan suddenly switched to Chinese yuan for its payments. Meanwhile, Brazil’s new government under President Lula da Silva recently announced that Brazilian companies can settle their foreign trade using Chinese yuan. Consequently, Brazilian companies have started to pay French companies in yuan for purchase of LNG, a first in their history. The yuan is now the most actively traded currency in Russia. And Bangladesh has been coerced into paying for Russian nuclear power using the yuan. These developments are not independent and unrelated.
A significant global outcome of the Russia-Ukraine conflict is the U.S. dollar-Chinese yuan conflict. The U.S. dollar has long enjoyed what a French Finance Minister called an “exorbitant privilege”. Nearly all nations trade with each other using the U.S. dollar, establishing its pre-eminence as the world’s reserve currency. The global trust in the dollar plays a vital role in establishing the U.S.’s status as a superpower. Evidently, the Chinese are no longer willing to accept American hegemony. Destabilising and dethroning the U.S. dollar is a key strategy for China to challenge the U.S. Its overtures and coercions to invoke other nations to switch to the yuan for trade settlements is a part of its grand ambitions to reshape the world order. In this context, India, a trillion dollar trading nation, has a huge role to play in determining the new global currency order.
