Global Currency Leadership: America and Chin

Authors Note: The following article was written in March of 2020 during the beginning of the pandemic and has not been updated.

The global pandemic has shaken the global economy and destabilized the economic stability of some of the largest and wealthiest countries in the world such as the United States. Before the virus, the United States was the most prominent leader in global markets controlling a majority of the currency in global bank reserves. The US Dollar’s significance and trust has deteriorated
since before the virus but has fallen even more due to a perceived lack of global intervention by the United States government. However, trust in China has not risen due to their cover-up of the Coronavirus during its early stages and their overall lack of transparency. Therefore, while America’s position as a
global political leader may be called into question, America’s global economic presence and control is undefeatable.

Much of the United States’ power is derived from their control of the SWIFT system. The SWIFT system is the mechanism used by financial institutions to globally transfer money. This is a vital operation and SWIFT makes this process very efficient for the banks which makes the system reliant on SWIFT. However, the United States has a large amount of influence on the SWIFT
system and their currency is most often used and the transactions must go through a United State routing bank which can block the transfer and hurt foreign adversaries. This ability to control the global money market is very important in establishing global dominance over the economy. China does not have a system as such and while they have tried to establish a non-bank system of money transfers, their intentions have been significantly called into question and many are weary of the Chinese system. This doubt and questioning of the Chinese government has been solidified due to their mishandling of the Covid-19 outbreak in Wuhan, China. The government of China covered up the outbreak and silenced whistleblowers who attempted to leak information about the virus. This lack of transparency prevented a global
response to the coronavirus and left many countries unprepared to contain the virus which has led to the widespread shutdowns across the globe. These shutdowns have brought the global economy to a halt and destroyed several economic indicators such as unemployment and GDP. This chain of events strips any trust in the Chinese government that their future intentions are well-meaning when they have repeatedly taken actions that call into question their transparency and truthfulness, two qualities that investors need when making decisions about where they will hold their currency.

Moving forward, the Chinese government will be facing harsh scrutiny from nations across the globe who have suffered great losses of lives and significant crashes of their economies. China’s has been proven incapable of global leadership and many will be cautious when approaching Chinese government programs such as their money transferring system that circumvents banks. This lack of trust will force countries to stay behind the United States and it’s
currency due to its transparency and stability. After the virus dies down, the demand for the Yuan will fall significantly as companies move away from China and attempt to find homes in countries with transparent governments. Many American companies may begin to move their factories back home to America which will further fuel the American economy and the demand
for the American Dollar keeping America as the global economic leader.