While almost everyone in China who can get out of the country is essentially "laundering" money by attempting to evade the ridiculous currency controls? The Russians arguably have more faith in the Yuan than the wealthy Chinese at this point, which is, well, I don't know what the adjective to use here but a mixture of funny and sad and wtf and irony and inevitable all rolled into one.
Yes, good luck with that Mr. Kim-Il Putin. You have a nice armoured train where you can hang out with your future buddies in armoured trains because that's where everything is headed.
The RMB is 100% a creation of Xi, the bank is mostly independent but it's 100% open to whatever Xi wants at any time. Both USD and Euro have their issues (the former worse than the latter), they are still out of political control and usable everywhere.
It's going to be really funny trying to predict the RUB/RMB trade because it's going to be like watching the moods of a couple 'frenemy leaders' stare each other down and will have less to do with underlying economics.
Because both currencies are politicised, they will be in a kind of permanent 'trade war' over the value off the paper they are sending each other. A lop-sided one at that.
From the fields of Ukraine into the mouth of the Dragon ...
> The RMB is 100% a creation of Xi, the bank is mostly independent but it's 100% open to whatever Xi wants at any time.
Xi is not a dictator. The part is authoritarian, but there are lots of backroom dealings between various power brokers that have to be considered. Saying RMB is 100% a creation of Xi implies that things will somehow change when Xi is inevitably out of power, which isn't really true at all (the same power structure will evolve with the next chosen president, who may be strong like Xi or weak like Hu, but still the same government). It would be more correct to say that "The RMB is 100% a creation of the CCP", but even that isn't very correct.
The RMB is freely convertible, which is annoying if you earn RMB and have to convert. But the Chinese government does appreciate stability, and they will keep the RMB at a fairly steady value (relative to the USD) in a way that tries to balance buying power with export competitiveness. This isn't a hyper-inflated currency by any means, and the RMB is much more stable than the RUB.
2) ", but there are lots of backroom dealings between various power brokers that have to be considered. " Yes, that's always the case.
I think maybe what you meant to say is that the RMB is managed by the Bank of China in a fairly independent way, but that might not be fully true.
And that's the point: just like Ali Baba is just a regular multifaceted cora. - it will 'have to do whatever Xi wants' when he wants to intervene.
USSR was centrally planned, China is not - but - Xi can put is finger in any pot, at any time , for whatever reason.
In this case, the RMB is a rational, independently managed currency with some political orientation - but most importantly, Xi has ultimate control.
3) It does not matter what happens when Xi leaves.
4) The RMB is a 'creation' of Xi/CCP because they can make it whatever they want.
5) That the RMB is freely convertible is a) false - there are heavy capital controls in China and b) it wouldn't matter. It's still a fiction of the CCP.
6) The RMB likes 'stability' but they mostly like to have the currency set to the value they want, i.e. political orientation. It's 'much more stable' than the RUB because China is much bigger and more sophisticated than Russia and can keep it that way.
Either party at this point can do magic accounting whenever they want with their currencies in ways that Fed/ECB generally cannot.
There's no trust between Russia and China, so they will have a hard time sharing their currencies.
China is not a dictatorship, it is more of a country ruled by an authoritarian party that is controlled by a few red families. Calling it such places was too much importance on one person who often acts just like a figurehead (albeit a very influential one) for the establishment.
I know all about RMB currency controls after living in China for 9 years. The RMB is still incredibly stable even when the situation merits less stability. The party values stability over everything else, it shows in their very conservative monetary policy.
I completely agree about China and Russia being frenemies. They will never share currencies, but letting the Russians use RMB for much of their trade with China is very much a possibility.
A bond between Russia and China over the next decade if not century could be a huge problem if China decides to pull the plug on products for US.
We import half trillion per year from China. Everything would disappear, prices would go up tenfold. I guess kind of like oil/gas for Europe from Russia.
In that case, wouldn't production in Vietnam, Philippines, Indonesia, and India REALLY ramp up to fill the vacuum? Especially over a longer timeline, the world will adjust. America will always find the cheapest place to acquire goods and services.
