Cold War, China, and the Future of the Dollar Hegemony

Since Nixon ended the USD's gold convertibility in 1971, predictions of the imminent fall of USD hegemony in the global economy have persisted. These predictions peaked in the aftermath of the 2008 Global Financial Crisis and again when U.S. sanctions on Russia intensified Russia and China's calls for de-dollarization. Despite this long-standing expectation, the majority of international trade transactions and foreign exchange reserves continue to be denominated in USD, and the anticipated challenge to the dollar hegemony by other currencies like the euro never materialized. I argue that the staying power of the USD, despite the U.S.'s declining economic standing, stems from the U.S. security umbrella on which most leading capitalist economies and commodity exporters rely. China is the only major capitalist power with both the geopolitical capabilities and ambitions to rival the U.S. This makes China’s RMB the first viable alternative to the USD, with the potential to challenge dollar hegemony and help usher in a multipolar monetary order. However, this potential has been constrained by China’s party-state capitalist regime, which prioritizes financial control through its state-owned banks, preventing the full convertibility of the RMB. While Cold War and post-Cold War geopolitics have sustained USD hegemony from the 1970s to the 2000s, China’s domestic politics have delayed the RMB's internationalization, thereby prolonging USD dominance into the foreseeable future.

About the Speaker

Ho-fung Hung is the Henry M. and Elizabeth P. Wiesenfeld Professor in Political Economy in the Department of Sociology and the Nitze School of Advanced International Studies at the Johns Hopkins University. He is the current Editor-in-Chief of the journal Asian Perspective. He is the author of several award-winning and critically acclaimed books, including Protest with Chinese Characteristics (Columbia 2011), The China Boom: Why China Will not Rule the World (Columbia 2015), City on the Edge: Hong Kong under Chinese Rule (Cambridge 2022), and Clash of Empires: From “Chimerica” to the “New Cold War” (Cambridge 2022). His academic publications have been translated into at least 12 different languages. His analyses of the Chinese and global political economy have been cited or featured in major outlets around the world, such as The New York Times, Washington Post, The Wall Street Journal, Foreign Policy, Foreign Affairs, CNN, Financial Times, CBC, BBC, The Guardian, The Telegraph, Die Presse, DW, The Little Red Podcast, Strait Times, Chosun Ilbo, Nikkei, Caixin, South China Morning Post, and Folha de S. Paulo.

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