China Takes Another Step Toward Independence from US Dollar
China announced it will start direct trading with the Swiss franc. This is another step in China’s relentless march toward becoming a major player on the world financial stage and away from dependence on the US dollar.
According to a Bloomberg report, the link between the currencies will begin Tuesday. The move by the China Foreign Exchange Trade System makes the Swiss franc the seventh major currency that can bypass conversion into the US dollar and be directly exchanged for yuan.
The People’s Bank of China said it welcomed the move in a statement on its website:
This is an important step in strengthening bilateral economic and trade connections between China and Switzerland. And China and Switzerland will make further efforts to mutually promote the direct trading between the two currencies based on market principle. Development of direct trading between RMB and CHF will contribute to the formation of direct exchange rate between the two currencies. This will help lower currency conversion cost for economic entities, facilitate the use of RMB and CHF in bilateral trade and investment, promote the financial cooperation and enhance economic and financial ties between the two countries.”
The announcement comes as China presses the yuan’s case for reserve-currency status at the International Monetary Fund.
As we reported late last month, three people briefed on IMF discussions said a draft report by agency staff reached a favorable conclusion on including the Chinese currency in the Special Drawing Rights basket. One officer said the path forward appears clear.
Interestingly, a large amount of gold is being recast and imported into China from Switzerland. The Wall Street Journal reported a major surge in exports from Switzerland in September.
Exports of gold by key supplier Switzerland to Hong Kong rose to 59.8 tons in September, 65% higher than in August and the highest monthly volume in 1½ years, according to a Commerzbank report.”
Could facilitating this ongoing gold trade be one of the reasons for this new currency exchange deal? It certainly is a possibility. From a broader perspective, the general influx of gold into China almost certainly makes up part of a strategy to raise the yuan’s stature on the world stage.
China has steadily increased its holdings of the precious metal since announcing the size of its stash in July. China likely added another 14 tons of gold to its reserves in October, based on Reuters calculations:
The value of China’s gold reserves stood at $63.261 billion at the end of October, compared with $61.189 billion at the end of September, the People’s Bank of China (PBOC) said on its website. Based on the London Bullion Market Association afternoon gold price on the last trading session of October, China’s reserves likely totaled 55.378 million troy ounces or 1,722.5 tons at the end of last month, Reuters calculations show.”
Many analysts believe the Chinese have increased their gold holding to stabilize the yuan, elevate its stature in the eyes of the international community, and ultimately pave the way to unpegging from the US dollar.
Chinese efforts to boost the yuan have proven effective. In August, the Chinese currency overtook the yen to become the fourth most-used currency for global payments. That was just some eight months after the yuan hopscotched the Australian and Canadian dollars to move from seventh to fifth in early 2015.
Peter Schiff said almost a year ago, shortly after China surpassed the US as the world’s largest economy (by one measurement), that he believes it’s only a matter of time before China and other countries jettison the US dollar altogether. A year later, it appears things continue to build in that direction.
Why I think they continue to be big buyers of gold, is because they’re preparing to jettison the dollar as their principle reserve. I think they are going to eliminate the peg. When they do, that’s going to be the birth of a new renaissance in China. You’re going to see China rise to a much greater degree. That’s going to be the sun setting on the American century. Without China’s support, we’re going to have to finally deal with the problems that have been building up in our economy for years. But China has spared us from having to deal with those problems.”
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China maybe is the largest world economy ,but it’s not treated by West and specially USA as equal partners but rather like enemy.
I believe we are at war with central banks. I believe that we can cut their supply line by dumping the dollar. All the bloated government employees could not spend their paychecks, the FED would be forced to cover their bad checks with foreign countries. We win.
Who are “we”, and how are “we” going to dump the dollar? The State-Corporate Complex long ago made certain that the dollar is our currency, our “legal tender”.
China is not the world’s largest economy, that is a typo. China recently surpassed Japan as the world’s SECOND largest economy. The U.S. is still #1 by a large degree.
Thank you for the critique, Andrew. In fact, this is a true statement when looking at the IMF’s measurement of economic output. We’ve updated this post with that caveat and the link to this source: https://schiffgold.com/key-gold-news/china-largest-world-economy-gold-014/
Dear Andrew,
Your comment is correct in one sense, the U.S. is the worlds biggest economy ,but perhaps there should be a caveat in your considerations …biggest ” bankrupt ” economy . U.S. credit is maxed out , with little / no hope of ever settling trillions of dollars of bad credit debt … let alone the futures and derivatives contracts , add to this the foreign governments that are owed hundreds of tons of “non existent” gold.
By any measure the outlook is very grim for the worlds biggest economy .
The U.S.D. is now inflated and apparently more valuable than most other world currencies .. who will be able to trade with the U.S. ??
The death of the petro dollar is underway as we speak .
“In God we trust” is written on U.S. currency , indeed …. divine intevention is the only possible way out in my view
Regards
Mr. Schiff accurately pieces the drugged, stupid, ignorant, insolent, debt slaves populating United States. After China exchanges all of our worthless bonds for real estate in the USA – the useless eaters can pray and hope. And as Lenin said, hope is the mother of a fool. But no problem, just go to Wall Mart and beg for more China produced toys. I am sure your expertise in watching sports games on television will qualify you for the distinguished title of Latrine Orderly – the guy that washes toilets.
The intrigue surrounding the topic of gold inventories internationally is fascinating. The US states that we have 8,300 tons of gold, but no one has seen it since 1973, and I believe there is little or nothing there. Russia is suspected of having 20,000 tons and this article stating that China has 1,722.5 tons of gold reserves has to be a joke, right? China has been buying all the gold it can find for at least 10 years that I know of and probably longer. It is also one of the largest producers of gold in the world “and they never sell it”. We also know that China’s media is controlled by China, so they only tell us what they want us to hear. I personally believe China has at least 25,000 tons of gold and perhaps more, based on the purchases that I know about. I believe their gold reserve status is only part of their commitment to become a international reserve currency and eventually the biggest economy in the world. Their recent “adjustment” in their currency was an important move that they had to make and their lead in the BRICS Alliance and the AIIB give them a powerful economic position worldwide. They are already beginning to flex their muscles, acting like a world power all over the globe. I’m sure the IMF will give them what they want very shortly.