Wang Jian (王建) from China Society of Macroeconomic Research, who proposed the Great External Circulation strategy back in 1987 that was officially adopted by the central government, talked about this in an interview in the early 2000s:

中国是享受到美元霸权的好处最大的国家……美国巨大的贸易逆差，是对中国产品的巨大需求，拉动了我们经济的增长……我们现在要担心的是，美元贬值引起国际金融大动荡，美元失去国际的货币的霸主地位，没有能力继续用经常项下的逆差来拉动亚洲，特别是对于中国的经济增长的影响，这才是最可怕的事。”

China is the greatest beneficiary of the dollar hegemony… the huge trade deficit of the US also represented a huge demand for Chinese products, and spurred our economic growth… What we have to worry about now, is the global financial instability caused by the depreciation of the US dollar. If the dollar loses its global currency hegemonic status, it will no longer have the capacity to sustain its deficit to drive Asia’s growth, and this will especially affect China’s economic growth. This would be the most terrible thing to happen.

In September 2020, months after China proposed the Dual Circulation Strategy (export balanced by domestic consumption), Wang Jian reasserted the importance of dollar hegemony in an interview:

中国是最依靠美元体系的国家，因为人民币没有国际化，而欧元、日元、韩元等都是国际化货币。过去，中国一直享受着美元霸权的好处，人民币不是国际化货币，但是中国的生意可以做到世界最大，因为中国用美元结算。如果美元体系崩溃，即美元作为储备货币和结算货币的比例发生断崖式下降，比如从60%下降到30%，受到伤害最大的一定是中国。所以在 “十四五”期间，一旦美元出问题，会对中国产生非常大的影响。

China is the country that relies the most on the dollar system, because the RMB is not internationalized, whereas the Euro, the Japanese yen, the Korean won, are all internationalized currencies. In the past, China has continuously enjoyed the benefit of the dollar hegemony - the RMB is not an internationalized currency, yet Chinese businesses can expand to become the world’s largest, because transactions in China are settled in US dollars. If the dollar system collapses, then the proportion of the US dollar as a reserve currency and settlement currency will fall steeply. For instance, if it drops from 60% to 30%, the country that is hurt the most must be China. Hence, if the dollar system encounters trouble during the 14th FYP period (2021-2025), it will cause great impact to China’s production.

Source is from Jia Genliang’s Modern Monetary Theory in China (2023)

Once you understand this, you will understand that China cannot and will not give up the dollar system, especially its hegemonic status. The status quo greatly benefited the Chinese economy and there is no reason to give up even when the US itself is threatening to end the arrangement, because China still has plenty of cards to play (e.g. rare earth export). The US will find itself unable to decouple from China.

This is also why when the US confiscation of Russia’s $300 billion foreign reserve at the start of the Russia-Ukraine war, and the Fed rate hike that caused dollar liquidity crisis in many Global South countries and spurred strong interest in many to leave the dollar regime, China has been the one that was and still is the most reluctant to abandon the US dollar. If China doesn’t want to, then nobody else can do anything about it. The Biden administration correctly gambled that China would not threaten the dollar hegemony during the rate hike in 2022.

[–] queermunist@lemmy.ml 1 points 2 days ago (1 children)

It's hard to reconcile this with the BRICS trying to set up their own currency alternative to dollars. That doesn't look like China "cannnot and will not give up on the dollar system" it looks like they're trying to build an off-ramp before it inevitably collapses.

[–] xiaohongshu@hexbear.net 1 points 2 days ago* (last edited 2 days ago)

And where is the plan of BRICS setting up their own currency?

They have been trying for the last three years, and learned the hard way that a confederated currency cannot possibly work among the different countries. If anything, it will only lead to an internal fracturing and the result is the dollar becoming even more hegemonic. This was the key lesson from Russia’s Kazan proposal on dedollarization at the BRICS summit in 2024.

The only way out is to use a federated currency backed by a strong economy. Euro and yen were two good, internationalized currencies that have the potential to challenge the dollar, but the US already pre-empted the dominance of the euro by destroying the European economy through the Ukraine war. The Japanese economy isn’t growing fast enough and isn’t up to the task anymore.

This brings us to yuan, which is backed by China’s strong economy, but since China refuses to give up its net exporter status, it cannot become a reserve currency that others can use for saving. China seems content with reaping the benefits of the dollar hegemony, so it’s a no go on that front either.