second half
And while many investors have reasonable fears about the effects of the war on global inflation, that doesn’t hit China too hard, since it has been struggling with inflation rates that are too low rather than too high. That allows the economy to absorb the shock of higher energy and input prices better than most.
The authorities in Beijing want to accelerate the internationalisation of the renminbi, a goal most recently emphasised in January when Qiushi, the Chinese Communist Party’s theoretical journal, published a speech of Xi Jinping’s which specified that China’s path to establishing itself as a ‘financial powerhouse’ means that it needs a ‘powerful currency, widely used in international trade, investment and foreign exchange markets, holding the status of a global reserve currency’.
China’s currency remains a minor player in the international financial system, even though the share of China’s trade that’s settled in renminbi has been growing fast.
The stability of its markets in recent weeks will add to its store of international trust. Washington, by contrast, seems to care little these days about winning trust. So, while the dollar’s status seems to have emerged from the war unscathed, the scars are there, albeit hidden.
