For the first time in recent history more financial trade is done in Chinese yuan than in euros. The yuan is now second but still far behind the U.S. dollar. Its rise in trade usage compared to the euro has been very recent and rapid and is certainly not yet finished. But the U.S. dollar is still second to none:
The currency had an 8.66 percent share of letters of credit and collections in October, compared with 6.64 percent for the euro, Swift said in a statement today. China, Hong Kong, Singapore, Germany and Australia were the top users of yuan in trade finance, according to the Belgium-based financial-messaging platform.
The yuan had the fourth-largest share of global trade finance in January 2012 with 1.89 percent, while the euro’s was the second-biggest at 7.87 percent, Swift said.
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The U.S. dollar led all currencies with an 81.08 percent share of letters of credit and collections in October, down from 84.96 percent in January 2012, according to data compiled by Swift.
The Japanese yen lost its position as one of the top three trade currencies.
These move are part of the changes in strategic balance in South-East Asia. New alliances may appear and there may even be a wider war on the horizon. This at least when one believes the predictions of realist political scientist John Mearsheimer. In an interview with the Chinese Global Times he predicts that China’s ‘Peaceful rise’ will meet US containment.
The US is now by far the most powerful state on the planet, and it is also the most powerful state in East Asia. But as China rises and becomes increasingly powerful, it will want to dominate Asia the way the US dominates the Western hemisphere. The US of course will go to great lengths to prevent China from dominating Asia. In other words, there will be an intense security competition between the two countries.
Mearsheimer does not think that China wants war but he believes that some kind of armed conflict will arise because some smaller state, likely then backed by the Unites States, will provoke a crisis. This he believes will happen sooner rather than later because China is still growing and taking it on while it is relatively weaker now is easier and less risky:
[T]here is no way that China can avoid scaring its neighbors and the US as it gets very powerful, just because it will be so big and will have so much military capability. When states look at other states and try to determine how threatening they are, they invariably focus on their capabilities, not their intentions, because you cannot know intentions. Nobody can know what China’s intentions will be in the decades ahead. But the mere fact that China is getting increasingly powerful and may someday become even more powerful than the US is naturally going to scare all the neighbors and the US.
Mearsheimer thinks that the very militarized U.S. “pivot to Asia” will be bigger than many envision for now. While that will be good news for the Middle East, Latin America and Europe it is bad news for Asia. But what could China actually do to prevent all this?
