The yuan and the dollar
Sunday 19 September 2021 211
China said that the world should prepare from now on to buy our goods in Chinese yuan, and the decision will be implemented after a month.
This remarkable early warning raises several questions, including: Will the yuan affect the value of the dollar? Or, in other words, will the Chinese currency replace the US currency?
It is known that global trade as a system through which the global market deals in dollars (fixed pricing), and on this basis, economists find it difficult for the Chinese yuan to replace the dollar or affect its value in the short and medium term.
This came during a discussion with someone in this regard, but he added that the Chinese yuan could affect the value of the dollar in the long run.
I found in this vision tangible facts on the ground, based on the speed of economic growth that China is leading over all global economies, and if this growth continues at a rapid pace as it is happening now, the yuan may outperform the dollar in the long run.
I find here in the Chinese decision and its new approach that it used its cunning in order to raise the value of its currency (the Chinese yuan) by imposing its currency in trade exchange operations, and thus will create a price balance with the dollar in the medium term.
The reason we expect the yuan to be able to compete with the dollar in the long run is that it follows the transactions of the oil market globally until China is able to contain all oil-exporting countries in accepting cooperation in the Chinese yuan, of course it needs a period of time, if it manages to acquire the oil market, and this depends Who will win the big fight next?
What is the extent and size of the implications for the Iraqi economy?
The percentage of Iraqi trade dependence on Chinese goods and commodities is 75 - 80% of the Iraqi market imports.
This means that the impact of the Chinese decision to impose its currency will be the largest on Iraqi trade.
In other words, the demand for the Chinese yuan will rise to the equivalent of the dollar, or they will gradually share the demand for them between the short and medium term stages.
Here, those in charge of monetary and fiscal policies must take into account the extent or size of the impact on the national economy as a result of this sudden decision, so as not to enter into the cycle of providing the two currencies in parallel with the demand for them.
The private sector, with its commercial and banking sectors, will be the one that will be most affected by this transformation, and it has to deal with the expected effects of this measure.
I expect that if the Chinese decision is implemented so quickly, it will cause chaos in the Iraqi market at first, and it is required to address it in advance.
For this reason, we said that Iraq needs to diversify its dealings with the countries of the world according to its interests;
Because the struggle of adults continues in all aspects of life, and we have to play with adults.