Today’s interview partner Wang Zichen from the non-governmental Chinese think tank Center for China and Globalization does not speak for the government in Beijing. However, it is safe to say that Wang does not strongly disagree with the government either. Xi Jinping and his regime have narrowed the opinion corridor in the People’s Republic far too much for that.
Following this logic, Wang puts some interesting proposals on the table, which Beijing would likely meet with approval in. Interviewed by Michael Radunski, Wang explains under which circumstances China’s government would most likely signal its willingness to exert more influence on Russia in the Ukraine war. A revival of the Comprehensive Agreement on Investment or the rehabilitation of Huawei as a network supplier would be the bait that could catch Beijing’s attention.
That might sound tempting to some EU politicians. But it should also be clear that China will not sell its aces for less than they are worth. Therefore, the price that Europe and the US would be willing to pay for greater Chinese involvement must be carefully considered.
Meanwhile, Fabian Kretschmer has taken a look at southern China, where Muslims of the Hui minority have probably fought in vain against the partial demolition of a mosque. This assumption is supported by the total physical and digital isolation of the village. This case shows that China’s integration policy does not allow for any compromises but drives a total ideological subordination of all ethnic groups. However, the wrecking ball will likely fail as a successful means of fighting extremism.
Mr. Wang, we are in the second year of the Ukraine war – and China has stepped forward with a proposal for peace talks. At the same time, however, the leadership in Beijing maintains a “borderless” friendship with Russia. How genuine is China’s initiative?
I think China is quite serious. It has put forward its political stance on the issue and sent a special envoy to Ukraine and five other destinations. Moreover regarding the ‘borderless’ relationship with Russia: The Chinese envoy in Brussels made clear that this is rhetorical only. I think, Beijing is not happy about what is going on in Ukraine.
But is China also willing to make use of its influence on Putin?
I see that many in the West insist that China has enormous leverage to pressure Moscow but the reality is much more difficult. The Chinese people don’t feel like they can push and pull Moscow too much.
But on the other hand, Putin would be in deep trouble without China’s support.
I would like to put it this way: Whenever a Chinese person looks at China on the world map, he or she sees an overbearing Russia, a huge country on top of China. The entire 20th century, Russia has had an enormous impact and influence on China. After a lot of problems, only in the past ten years or so, the two countries have become close geopolitical partners, especially against what they perceive as US containment and encirclement. Although Russia’s economy is just equivalent to perhaps the Guangdong province, in China’s mind it is still a superpower with a big nuclear arsenal and with sophisticated technology. And don’t forget: The border between China and Russia is thousands of kilometers long, and with good relations, they don’t have to guard it much.
But in order to seriously promote peace talks…
Regarding the initiative for a political settlement: China doesn’t have a history of interfering in crises especially where China isn’t a party to – unlike the United States, which has been acting like the policeman of the world. China’s foreign policy has been based on noninterference ever since the 1950s. Therefore, it has to develop its own approach.
Certainly, but to be an honest broker, it requires at least a little distance from Russia.
These Western requests mean for China to make huge sacrifices of its own interests and in the end, alienate and antagonize Russia. If China followed these requests and sanctioned Russia, it would mean that China should shoulder big costs for something it didn’t cause.
Why is China so reluctant?
Not just China. Look at the votes at the United Nations: Over 140 countries condemned Russia’s invasion of Ukraine. But if you look at the countries who have slapped sanctions on Russia, it’s basically just a bit over 40 countries – and 27 of them are EU member states. None of the Global South countries has joined the sanctions on Russia, including China, India, Brazil. The overwhelming majority of the world, especially the poorer countries, don’t feel an obligation to shoulder the cost of something that they think they didn’t start.
How relevant is this war for countries in Asia and the rest of the world, anyway?
First, I totally understand that it is very important for the EU, especially for those in the Eastern European countries, neighboring Ukraine, as they are the second-biggest victims after the Ukrainian people. I lived in Europe for 29 months and I admire the European project, which is a peace project. But for countries far away, it’s just something people see on TV and social media. Second, the European Union, with all its history and the Cold War, they are used to guarding against Russian troops for many years. But this history isn’t universally shared in other parts of the world. And third, maybe more important, the global south countries share a history of colonialism and they feel the developed countries haven’t been taking care of them as much as they should. All that sums up in a sense of distance to the discussion.
War is bad everywhere in the world, for everyone. That is why it should end quickly.
Yes. But the US and Europe are only pressuring China. So far, they haven’t been able to come up with any incentives to get China on their side. Offering incentives would be a more pragmatic approach, especially for the Europeans.
Why Europe?
Because between China and the United States, we see a very fierce competition, which will last. And second: Beijing apparently wants Europe to distance itself from its Trans-Atlantic partner and get Europe closer to itself. So Europe has some leverage over a very eager China.
What could or should Europe offer?
China’s ambassador in Brussels has repeatedly said that China wants the Comprehensive Agreement on Investment CAI back on the table and is open to proposals. I think Europe is actually in the position to incentivize China rather than just purely pressure China.
Could the CAI make a difference?
If Europe were to entertain this idea, I think there are a lot of options.
What do you mean?
For example, dialing back US-masterminded restrictions on Huawei and ZTE and refraining from joining the US in export control of technology, which would send strong signals of strategic autonomy. And they can be paired with China working to deliver European and Ukrainian goals such as exchanging prisoners of war, establishing humanitarian corridors for civilians, returning Ukrainian children, and ultimately cease-fire and peace.
Wang Zichen is Deputy Director and Research Fellow at the Center for China and Globalization (CCG), a leading non-government think tank in China.
Only a few hours after the morning prayer at the Najiaying Mosque in Nagu, the bulldozers approached. They were guarded by several hundred security forces who immediately blocked off the entrance to the prayer house in the southern Chinese province of Yunnan and erected scaffolding around the façade. A unit of the People’s Liberation Army also moved into position. Their mission: To “clean up” the Muslim religious building in the southern Chinese province of Yunnan. Four minarets and the huge entrance dome were supposed to be removed.
But the townspeople, members of the Muslim Hui minority, resisted. They tore down construction fences, threw objects at the police officers, who – visibly caught off guard and overwhelmed – retreated from the courtyard of the mosque. The local population eventually formed a huge human chain. The men were soon relieved by their wives, who also loudly opposed the security forces and protected their mosque.
This escalation has its roots in 2020, when a court ordered the partial demolition of the mosque. The building, built in the 13th century, was expanded in previous years with the addition of the minarets and the entrance dome. However, the court deemed these additions illegal. The court’s decision was a stab in the heart of the Hui people.
Their mosque holds a special status in the region. Many of the imams in Yunnan province are trained in the local prayer school, after all. It seems rather contradictory that it could be a breeding ground for extremism, of all places, because of the 57 ethnic groups in the People’s Republic, the Muslims of the Hui minority are considered to be largely assimilated into the dominant Han Chinese.
However, the demolition of Muslim houses of worship is only the visible part of a systematic re-education of Muslims. It is part of a campaign that purports to nip potential extremism in the bud and replace religious values with socialist ones. As early as the spring of 2016, President Xi Jinping initiated a nationwide campaign to “Sinicize the religions“, primarily targeting Islam.
In several provinces, mainly in Xinjiang, mosques were either completely demolished or partially destroyed. If anything remained, Arabic-looking architecture was replaced by Han Chinese building elements.
This increasingly repressive policy under Xi Jinping has given rise to silent resistance in recent years. A young Hui Muslim, whose family is from a village in northern China and wishes to remain anonymous, reports: “My family has retreated more and more into Islam in the last few years.” They would not talk openly about politics in the family, but it is obvious to him that the less welcome his parents and their neighbors feel, the more they focus on their Islamic identity. On top of that, there are more restrictions, regulations and bans.
In Nagu, the severity of state power seems to create radicalization rather than eliminate it. The lack of direction from the central government in Beijing is also to blame. It only issued a vague order to make mosques more “Chinese”. The implementation is left to the municipalities, which are careful not to cause trouble for their superiors in order to avoid consequences for themselves.
The approach of the Nagu authorities was correspondingly uncompromising. Initially, they attempted to “convince” the residents of the urgency of the demolition with ideological arguments. But when not all of them agreed freely, they threatened to cut their wages.
In addition, the authorities responded with aerial drone surveillance. No one was allowed to leave their homes. Jammers disrupted the town’s internet and telephone connections. Military checkpoints monitored all road access. Dozens of protesters were reportedly arrested. Residents passed video footage of the protests to activists in exile before the censors were able to erase it.
Detailed reports on the actual status of the demolition work are not yet available. But the hopes of the Hui people seem to have been in vain. One resident told US radio station NPR: “We know our fate. We’re powerless. But we’re just hoping to preserve our last bit of religious freedom and our last shreds of dignity.”
The fear of the Muslims of Nagu probably also has to do with the fact that they are well aware of the repression in the northwestern region of Xinjiang. There, too, countless mosques were razed to the ground before the government sent hundreds of thousands of ethnic Uyghurs to re-education camps over the past five years.
The Hong Kong police took stock the day after 4 June. According to it, 23 people were arrested for disturbing public order. People had publicly commemorated the suppression of the pro-democracy protests 34 years ago in Tiananmen Square in Beijing. Among other places, several people had gathered in Victoria Park on Sunday, where hundreds of thousands had participated in the vigils just a few years ago.
The authorities’ crackdown in Hong Kong on the 34th anniversary of the suppression of the Tiananmen protests has drawn the attention of the United Nations (UN), among others. UN Human Rights Commissioner Volker Tuerk’s office called the reports of arrests alarming on Twitter. “We urge the release of anyone detained for exercising freedom of expression and peaceful assembly.”
According to local media reports, security in Hong Kong had been tightened this year. Up to 6,000 police officers are said to have been deployed. In the run-up to the anniversary, government officials had urged people to abide by the law. However, they had left open whether commemorative rallies were illegal.
In response to mass protests in Hong Kong, the Chinese government passed a national security law in 2019. It is considered the most significant encroachment on the autonomy of the former British crown colony, which was promised for at least 50 years when it was handed over to China in 1997 in accordance with the “one country, two systems” principle. rtr
China’s ambassador to France has defended his statements regarding the independence of former Soviet republics. However, there was no sign of remorse. On the contrary, “I think this debate is not about whether I was right or wrong, but whether there is freedom of speech in public debate on television,” said Lu Shaye in an interview with Régis de Castelnau, a controversial French lawyer who runs the blog site “Vu Du Droit.” The one-hour interview was broadcast on Réseau International, which regularly publishes fake news and disinformation.
Lu cited the debate about his person as an example of the lack of freedom of speech. In this context, he complained that a French TV station had deliberately “stirred up” angry reactions, a behavior that was “very unfair.”
In April, Lu Shaye questioned the sovereignty of former Soviet republics in an interview with the French television station La Chaîne Info (LCI). A heated discussion ensued, and even the leadership in Beijing felt compelled to publicly correct the statement. “China respects the status of the former Soviet republics as sovereign countries after the Soviet Union’s dissolution,” said a spokeswoman for the Chinese Foreign Ministry.
But Lu sees himself as the victim. He said he had the right to express his personal opinions, which were not “made up” and could be discussed. What is not okay, he said, is the behavior of others: LCI, which is part of the French channel TF1, instead “launched an attack” against him. “The day after the interview, they invited some so-called China experts on the same program to criticize and condemn me,” Lu said. “They have violated journalistic ethics.” rad
After the global financial crisis of 2007 and 2008, China started to internationalize its currency, the renminbi (RMB) or yuan, first as a trade currency and later also as a reserve currency. This process was initially successful and culminated in the official inclusion of the RMB in the International Monetary Fund’s (IMF) special drawing rights on 1 October 2016.
However, the stock market crash of 2015, which spilled over into the foreign exchange markets, led to a sharp devaluation. The Chinese central bank PBoC tried to control the devaluation pressure by unilaterally and surprisingly devaluing the RMB by almost four percent on two trading days in quick succession. The attempt backfired. A massive capital flight was the result. It cost China around one trillion dollars in currency reserves to halfway calm the situation at the beginning of 2016.
The internationalization of the renminbi has come to a standstill since this episode. From the Chinese perspective, the liberalization and internationalization of the RMB have not paid off. Instead, it has resulted in a loss of control over its own currency that has hurt more than the loss of ambitions to develop the renminbi into an international reserve currency on par with the US dollar. China thinks strategically and has time.
The Russian invasion of Ukraine has radically changed the situation. Not because of the invasion itself but due to the Western sanctions, which are known to involve freezing Russian currency reserves and excluding Russia from the SWIFT international payment system. This has raised fears in many emerging economies that they, too, could be hit by such sanctions in the future.
China itself still holds around three trillion US dollars in foreign exchange reserves, with a significant amount in US treasury bonds. It is no coincidence that the country has systematically reduced this stock over the last six months. In parallel, Beijing is lending US dollars to third countries with the agreement that repayment will be made in RMB.
But other countries are also considering this direction. Brazil’s President Lula emphasizes that the BRICS countries must reduce their dependence on the US dollar. Apparently, the states are already in first talks on what an alternative to the dollar could look like. The same goes for the ASEAN states, which recently decided to settle their trade in regional currencies. Currencies and finance have apparently become a weapon in the geopolitical struggle, threatening the unchallenged supremacy of the dollar.
The numbers confirm the trend: Chinese-Russian trade, which almost doubled last year to around 200 billion US dollars, is now largely billed in renminbi. Settlement takes place via the cross-border settlement system CIPS (Cross-Border Interbank Payment) set up by China. So far, only 79 financial institutions are connected to the system. For SWIFT, it is 11,000, but the number of CIPS is rising steadily.
Within the SWIFT system, too, the settlement of transactions in renminbi has almost doubled since the Russian invasion, accounting for nearly five percent of all cross-border trade transactions worldwide. Around 50 percent of China’s foreign trade is now conducted in renminbi.
However, the US dollar continues to dominate with a share of about 85 percent, while the euro as a trading currency only has a six percent share and will soon be overtaken by the RMB. The dominance of the dollar is attributable to third-country trade in dollars. However, it is by no means impossible that the renminbi will catch up in this respect as well. The peace agreement between Tehran and Riyadh brokered by China could be a herald of such changes.
However, the pinnacle of an international currency is its role as a reserve currency, held by central banks and global financial institutions to remain solvent under all circumstances. Here, the renminbi lags even further behind. Only just under three percent of global currency reserves are renminbi, while the dollar accounts for around 60 percent. Although, the share of the renminbi was just one percent in 2016.
Incidentally, the euro currently has a share of 20 percent as a reserve currency. This, like the low share as a trading currency, shows that the euro is not really an international reserve currency that could challenge the dollar’s status. Just as the EU is not a global player, neither is the euro as a currency. The battle on the global currency front is being fought between the US and China.
But it is doubtful that the renminbi could replace the US dollar as the international reserve currency in the foreseeable future. It lacks free, cross-border capital flows. And the administered exchange rate is also a hindrance. For example, the dollar’s current weakness is not offset by holding more renminbi reserves; instead, central banks are increasing their gold holdings.
On the other hand, there can be little doubt that we are heading for a world of renewed bloc formation – like it or not. During such a geopolitical reordering, a bipolar or even multipolar monetary system could emerge. Under such a scenario, a loss of importance of the US dollar’s role as the international reserve currency seems inevitable over time.
The question is how high and how fast the loss of significance will be. This also depends crucially on whether the Chinese leadership does its homework and further liberalizes both capital movements and the exchange rate. After all, you can only have one of the two: the renminbi as the international reserve currency or the current exchange rate regime.
Horst Loechel is Professor of Economics at the Frankfurt School of Finance & Management and Co-Chair of its Sino-German Center.
Wang in Hangzhou has the best shaobing and youtiao in town. This is something many customers have known for a long time. But now everyone can read about it in the Michelin Guide 2023, which has included Wang’s small bakery in its exclusive list.
Today’s interview partner Wang Zichen from the non-governmental Chinese think tank Center for China and Globalization does not speak for the government in Beijing. However, it is safe to say that Wang does not strongly disagree with the government either. Xi Jinping and his regime have narrowed the opinion corridor in the People’s Republic far too much for that.
Following this logic, Wang puts some interesting proposals on the table, which Beijing would likely meet with approval in. Interviewed by Michael Radunski, Wang explains under which circumstances China’s government would most likely signal its willingness to exert more influence on Russia in the Ukraine war. A revival of the Comprehensive Agreement on Investment or the rehabilitation of Huawei as a network supplier would be the bait that could catch Beijing’s attention.
That might sound tempting to some EU politicians. But it should also be clear that China will not sell its aces for less than they are worth. Therefore, the price that Europe and the US would be willing to pay for greater Chinese involvement must be carefully considered.
Meanwhile, Fabian Kretschmer has taken a look at southern China, where Muslims of the Hui minority have probably fought in vain against the partial demolition of a mosque. This assumption is supported by the total physical and digital isolation of the village. This case shows that China’s integration policy does not allow for any compromises but drives a total ideological subordination of all ethnic groups. However, the wrecking ball will likely fail as a successful means of fighting extremism.
Mr. Wang, we are in the second year of the Ukraine war – and China has stepped forward with a proposal for peace talks. At the same time, however, the leadership in Beijing maintains a “borderless” friendship with Russia. How genuine is China’s initiative?
I think China is quite serious. It has put forward its political stance on the issue and sent a special envoy to Ukraine and five other destinations. Moreover regarding the ‘borderless’ relationship with Russia: The Chinese envoy in Brussels made clear that this is rhetorical only. I think, Beijing is not happy about what is going on in Ukraine.
But is China also willing to make use of its influence on Putin?
I see that many in the West insist that China has enormous leverage to pressure Moscow but the reality is much more difficult. The Chinese people don’t feel like they can push and pull Moscow too much.
But on the other hand, Putin would be in deep trouble without China’s support.
I would like to put it this way: Whenever a Chinese person looks at China on the world map, he or she sees an overbearing Russia, a huge country on top of China. The entire 20th century, Russia has had an enormous impact and influence on China. After a lot of problems, only in the past ten years or so, the two countries have become close geopolitical partners, especially against what they perceive as US containment and encirclement. Although Russia’s economy is just equivalent to perhaps the Guangdong province, in China’s mind it is still a superpower with a big nuclear arsenal and with sophisticated technology. And don’t forget: The border between China and Russia is thousands of kilometers long, and with good relations, they don’t have to guard it much.
But in order to seriously promote peace talks…
Regarding the initiative for a political settlement: China doesn’t have a history of interfering in crises especially where China isn’t a party to – unlike the United States, which has been acting like the policeman of the world. China’s foreign policy has been based on noninterference ever since the 1950s. Therefore, it has to develop its own approach.
Certainly, but to be an honest broker, it requires at least a little distance from Russia.
These Western requests mean for China to make huge sacrifices of its own interests and in the end, alienate and antagonize Russia. If China followed these requests and sanctioned Russia, it would mean that China should shoulder big costs for something it didn’t cause.
Why is China so reluctant?
Not just China. Look at the votes at the United Nations: Over 140 countries condemned Russia’s invasion of Ukraine. But if you look at the countries who have slapped sanctions on Russia, it’s basically just a bit over 40 countries – and 27 of them are EU member states. None of the Global South countries has joined the sanctions on Russia, including China, India, Brazil. The overwhelming majority of the world, especially the poorer countries, don’t feel an obligation to shoulder the cost of something that they think they didn’t start.
How relevant is this war for countries in Asia and the rest of the world, anyway?
First, I totally understand that it is very important for the EU, especially for those in the Eastern European countries, neighboring Ukraine, as they are the second-biggest victims after the Ukrainian people. I lived in Europe for 29 months and I admire the European project, which is a peace project. But for countries far away, it’s just something people see on TV and social media. Second, the European Union, with all its history and the Cold War, they are used to guarding against Russian troops for many years. But this history isn’t universally shared in other parts of the world. And third, maybe more important, the global south countries share a history of colonialism and they feel the developed countries haven’t been taking care of them as much as they should. All that sums up in a sense of distance to the discussion.
War is bad everywhere in the world, for everyone. That is why it should end quickly.
Yes. But the US and Europe are only pressuring China. So far, they haven’t been able to come up with any incentives to get China on their side. Offering incentives would be a more pragmatic approach, especially for the Europeans.
Why Europe?
Because between China and the United States, we see a very fierce competition, which will last. And second: Beijing apparently wants Europe to distance itself from its Trans-Atlantic partner and get Europe closer to itself. So Europe has some leverage over a very eager China.
What could or should Europe offer?
China’s ambassador in Brussels has repeatedly said that China wants the Comprehensive Agreement on Investment CAI back on the table and is open to proposals. I think Europe is actually in the position to incentivize China rather than just purely pressure China.
Could the CAI make a difference?
If Europe were to entertain this idea, I think there are a lot of options.
What do you mean?
For example, dialing back US-masterminded restrictions on Huawei and ZTE and refraining from joining the US in export control of technology, which would send strong signals of strategic autonomy. And they can be paired with China working to deliver European and Ukrainian goals such as exchanging prisoners of war, establishing humanitarian corridors for civilians, returning Ukrainian children, and ultimately cease-fire and peace.
Wang Zichen is Deputy Director and Research Fellow at the Center for China and Globalization (CCG), a leading non-government think tank in China.
Only a few hours after the morning prayer at the Najiaying Mosque in Nagu, the bulldozers approached. They were guarded by several hundred security forces who immediately blocked off the entrance to the prayer house in the southern Chinese province of Yunnan and erected scaffolding around the façade. A unit of the People’s Liberation Army also moved into position. Their mission: To “clean up” the Muslim religious building in the southern Chinese province of Yunnan. Four minarets and the huge entrance dome were supposed to be removed.
But the townspeople, members of the Muslim Hui minority, resisted. They tore down construction fences, threw objects at the police officers, who – visibly caught off guard and overwhelmed – retreated from the courtyard of the mosque. The local population eventually formed a huge human chain. The men were soon relieved by their wives, who also loudly opposed the security forces and protected their mosque.
This escalation has its roots in 2020, when a court ordered the partial demolition of the mosque. The building, built in the 13th century, was expanded in previous years with the addition of the minarets and the entrance dome. However, the court deemed these additions illegal. The court’s decision was a stab in the heart of the Hui people.
Their mosque holds a special status in the region. Many of the imams in Yunnan province are trained in the local prayer school, after all. It seems rather contradictory that it could be a breeding ground for extremism, of all places, because of the 57 ethnic groups in the People’s Republic, the Muslims of the Hui minority are considered to be largely assimilated into the dominant Han Chinese.
However, the demolition of Muslim houses of worship is only the visible part of a systematic re-education of Muslims. It is part of a campaign that purports to nip potential extremism in the bud and replace religious values with socialist ones. As early as the spring of 2016, President Xi Jinping initiated a nationwide campaign to “Sinicize the religions“, primarily targeting Islam.
In several provinces, mainly in Xinjiang, mosques were either completely demolished or partially destroyed. If anything remained, Arabic-looking architecture was replaced by Han Chinese building elements.
This increasingly repressive policy under Xi Jinping has given rise to silent resistance in recent years. A young Hui Muslim, whose family is from a village in northern China and wishes to remain anonymous, reports: “My family has retreated more and more into Islam in the last few years.” They would not talk openly about politics in the family, but it is obvious to him that the less welcome his parents and their neighbors feel, the more they focus on their Islamic identity. On top of that, there are more restrictions, regulations and bans.
In Nagu, the severity of state power seems to create radicalization rather than eliminate it. The lack of direction from the central government in Beijing is also to blame. It only issued a vague order to make mosques more “Chinese”. The implementation is left to the municipalities, which are careful not to cause trouble for their superiors in order to avoid consequences for themselves.
The approach of the Nagu authorities was correspondingly uncompromising. Initially, they attempted to “convince” the residents of the urgency of the demolition with ideological arguments. But when not all of them agreed freely, they threatened to cut their wages.
In addition, the authorities responded with aerial drone surveillance. No one was allowed to leave their homes. Jammers disrupted the town’s internet and telephone connections. Military checkpoints monitored all road access. Dozens of protesters were reportedly arrested. Residents passed video footage of the protests to activists in exile before the censors were able to erase it.
Detailed reports on the actual status of the demolition work are not yet available. But the hopes of the Hui people seem to have been in vain. One resident told US radio station NPR: “We know our fate. We’re powerless. But we’re just hoping to preserve our last bit of religious freedom and our last shreds of dignity.”
The fear of the Muslims of Nagu probably also has to do with the fact that they are well aware of the repression in the northwestern region of Xinjiang. There, too, countless mosques were razed to the ground before the government sent hundreds of thousands of ethnic Uyghurs to re-education camps over the past five years.
The Hong Kong police took stock the day after 4 June. According to it, 23 people were arrested for disturbing public order. People had publicly commemorated the suppression of the pro-democracy protests 34 years ago in Tiananmen Square in Beijing. Among other places, several people had gathered in Victoria Park on Sunday, where hundreds of thousands had participated in the vigils just a few years ago.
The authorities’ crackdown in Hong Kong on the 34th anniversary of the suppression of the Tiananmen protests has drawn the attention of the United Nations (UN), among others. UN Human Rights Commissioner Volker Tuerk’s office called the reports of arrests alarming on Twitter. “We urge the release of anyone detained for exercising freedom of expression and peaceful assembly.”
According to local media reports, security in Hong Kong had been tightened this year. Up to 6,000 police officers are said to have been deployed. In the run-up to the anniversary, government officials had urged people to abide by the law. However, they had left open whether commemorative rallies were illegal.
In response to mass protests in Hong Kong, the Chinese government passed a national security law in 2019. It is considered the most significant encroachment on the autonomy of the former British crown colony, which was promised for at least 50 years when it was handed over to China in 1997 in accordance with the “one country, two systems” principle. rtr
China’s ambassador to France has defended his statements regarding the independence of former Soviet republics. However, there was no sign of remorse. On the contrary, “I think this debate is not about whether I was right or wrong, but whether there is freedom of speech in public debate on television,” said Lu Shaye in an interview with Régis de Castelnau, a controversial French lawyer who runs the blog site “Vu Du Droit.” The one-hour interview was broadcast on Réseau International, which regularly publishes fake news and disinformation.
Lu cited the debate about his person as an example of the lack of freedom of speech. In this context, he complained that a French TV station had deliberately “stirred up” angry reactions, a behavior that was “very unfair.”
In April, Lu Shaye questioned the sovereignty of former Soviet republics in an interview with the French television station La Chaîne Info (LCI). A heated discussion ensued, and even the leadership in Beijing felt compelled to publicly correct the statement. “China respects the status of the former Soviet republics as sovereign countries after the Soviet Union’s dissolution,” said a spokeswoman for the Chinese Foreign Ministry.
But Lu sees himself as the victim. He said he had the right to express his personal opinions, which were not “made up” and could be discussed. What is not okay, he said, is the behavior of others: LCI, which is part of the French channel TF1, instead “launched an attack” against him. “The day after the interview, they invited some so-called China experts on the same program to criticize and condemn me,” Lu said. “They have violated journalistic ethics.” rad
After the global financial crisis of 2007 and 2008, China started to internationalize its currency, the renminbi (RMB) or yuan, first as a trade currency and later also as a reserve currency. This process was initially successful and culminated in the official inclusion of the RMB in the International Monetary Fund’s (IMF) special drawing rights on 1 October 2016.
However, the stock market crash of 2015, which spilled over into the foreign exchange markets, led to a sharp devaluation. The Chinese central bank PBoC tried to control the devaluation pressure by unilaterally and surprisingly devaluing the RMB by almost four percent on two trading days in quick succession. The attempt backfired. A massive capital flight was the result. It cost China around one trillion dollars in currency reserves to halfway calm the situation at the beginning of 2016.
The internationalization of the renminbi has come to a standstill since this episode. From the Chinese perspective, the liberalization and internationalization of the RMB have not paid off. Instead, it has resulted in a loss of control over its own currency that has hurt more than the loss of ambitions to develop the renminbi into an international reserve currency on par with the US dollar. China thinks strategically and has time.
The Russian invasion of Ukraine has radically changed the situation. Not because of the invasion itself but due to the Western sanctions, which are known to involve freezing Russian currency reserves and excluding Russia from the SWIFT international payment system. This has raised fears in many emerging economies that they, too, could be hit by such sanctions in the future.
China itself still holds around three trillion US dollars in foreign exchange reserves, with a significant amount in US treasury bonds. It is no coincidence that the country has systematically reduced this stock over the last six months. In parallel, Beijing is lending US dollars to third countries with the agreement that repayment will be made in RMB.
But other countries are also considering this direction. Brazil’s President Lula emphasizes that the BRICS countries must reduce their dependence on the US dollar. Apparently, the states are already in first talks on what an alternative to the dollar could look like. The same goes for the ASEAN states, which recently decided to settle their trade in regional currencies. Currencies and finance have apparently become a weapon in the geopolitical struggle, threatening the unchallenged supremacy of the dollar.
The numbers confirm the trend: Chinese-Russian trade, which almost doubled last year to around 200 billion US dollars, is now largely billed in renminbi. Settlement takes place via the cross-border settlement system CIPS (Cross-Border Interbank Payment) set up by China. So far, only 79 financial institutions are connected to the system. For SWIFT, it is 11,000, but the number of CIPS is rising steadily.
Within the SWIFT system, too, the settlement of transactions in renminbi has almost doubled since the Russian invasion, accounting for nearly five percent of all cross-border trade transactions worldwide. Around 50 percent of China’s foreign trade is now conducted in renminbi.
However, the US dollar continues to dominate with a share of about 85 percent, while the euro as a trading currency only has a six percent share and will soon be overtaken by the RMB. The dominance of the dollar is attributable to third-country trade in dollars. However, it is by no means impossible that the renminbi will catch up in this respect as well. The peace agreement between Tehran and Riyadh brokered by China could be a herald of such changes.
However, the pinnacle of an international currency is its role as a reserve currency, held by central banks and global financial institutions to remain solvent under all circumstances. Here, the renminbi lags even further behind. Only just under three percent of global currency reserves are renminbi, while the dollar accounts for around 60 percent. Although, the share of the renminbi was just one percent in 2016.
Incidentally, the euro currently has a share of 20 percent as a reserve currency. This, like the low share as a trading currency, shows that the euro is not really an international reserve currency that could challenge the dollar’s status. Just as the EU is not a global player, neither is the euro as a currency. The battle on the global currency front is being fought between the US and China.
But it is doubtful that the renminbi could replace the US dollar as the international reserve currency in the foreseeable future. It lacks free, cross-border capital flows. And the administered exchange rate is also a hindrance. For example, the dollar’s current weakness is not offset by holding more renminbi reserves; instead, central banks are increasing their gold holdings.
On the other hand, there can be little doubt that we are heading for a world of renewed bloc formation – like it or not. During such a geopolitical reordering, a bipolar or even multipolar monetary system could emerge. Under such a scenario, a loss of importance of the US dollar’s role as the international reserve currency seems inevitable over time.
The question is how high and how fast the loss of significance will be. This also depends crucially on whether the Chinese leadership does its homework and further liberalizes both capital movements and the exchange rate. After all, you can only have one of the two: the renminbi as the international reserve currency or the current exchange rate regime.
Horst Loechel is Professor of Economics at the Frankfurt School of Finance & Management and Co-Chair of its Sino-German Center.
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