KARACHI:
After the end of World War 2 in 1944, 44 allied countries’ leaders met in Bretton Woods to reach a common ground for future peace and prosperity. The focus of the meeting was to avert financial turmoil in the future. They were successful in forming a system for the global economy. Consequently, the International Monetary Fund and the World Bank emerged. The countries also agreed to peg their currencies to the dollar, and a new exchange rate system came about. In 1973, the Petro-dollar deal was signed by US-Saudi Arabia to price and trade oil in US dollars. This petro-dollar agreement gave the US dollar a dominant global position. Thus, providing the US with unprecedented power to become a global leader.
Now rumours have emerged that China is pushing to internationalise its currency to replace the USD with the yuan. This may threaten dollar supremacy because China is already surpassing the US in many fields. China has also amended ties with key global players i.e., Saudi Arabia and is pursuing trade with different countries. China can potentially replace the petro-dollar with the petro-yuan and develop a new exchange rate system.
If this happens, China will emerge as a global leader like the US. China and Brazil have already agreed on trade exchanges in their local currencies. Between 2009 to 2020, China entered bilateral currency swap agreements with forty-one countries across the globe. Put simply, the Chinese yuan may soon become an important currency and the unipolar world may turn into a multipolar one.
Abu Bakar Sadiq
Buner
Published in The Express Tribune, April 14th, 2023.
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