The former governor of the Chinese central bank, Zhou Xiaochuan, insisted in a recent interview that “unless there is [a] change in the global landscape” the U.S. dollar will remain the global reserve and payment currency. While he admitted that digital currencies could potentially become alternatives to the dollar, the former governor claimed that any process to change the role of the dollar is likely to be “very slow.”
In his remarks while being interviewed by CGTN, Xiaochuan, however, suggested that policy “mistakes” by the U.S. government might potentially have a bearing on the dollars continued dominance. Xiaochuan, who is now the vice-chairman of the Boao Forum for Asia, points to the use of the dollar as a sanctioning tool as one such mistake. Xiaochuan explained:
For example, if we rely too much on the dollar system to impose financial sanctions, of course, if you impose sanctions, people will hide from you, and your role in payment and reserves will inevitably decline.
Still, the former governor cautions that using the dollar system to impose sanctions just like other factors will not lead to the sudden waning of the currencys dominance. He said when looked at from the perspective of reserves or from that of value storage, the dollar “has great inertia.”
“You cant say that the things you saved before are suddenly useless,” argued Xiaochuan.
People Used to Dollar Payment SystemWhen looked at from the perspective of payment, the former governor argued that because people have become used to getting paid in dollars, it will be difficult for them to suddenly shift to an alternative.
Despite not being optimistic about the prospects of alternatives to the dollar, Xiaochuan nonetheless suggested that China does advocate for a global reserve that is not dominated by one currency.