Conclusion
It is not clear when the PBoC will unleash its attack on the US dollar, but what is clear is that preparations are underway to undermine the US dollar and promote the renminbi as a major international reserve currency. The US has nothing at present to compete with the DCEP. The 8,000 tons of gold that the US has will take second place to Chinese holdings, which might be as high as 20,000 tons. This factor will possibly be decisive in undermining trust in the US dollar and favor the renminbi when the PBoC makes its move.
This writer has often suggested that portfolio diversification into other currencies and countries is one way of countering future US dollar depreciation. Just how much the US dollar will depreciate is a matter of speculation. Given that Asia will become the most important economic area globally in the near future, and that means within two to three years, demand for the US dollar will markedly decrease when the PRC (People’s Republic of China) demands payment in yuan and not US dollars. One reason for this assumption is that US GDP has and will have suffered from the COVID-19 epidemic and the measures taken, namely, lockdowns, to try and contain the virus. In fact, there are so many factors involved in what will be a transition from a US dollar-dominated global economy to a situation where the yuan plays an important role that it is difficult to reckon how much the US dollar will depreciate. One can speculate, but investors should prepare for the change.
