Aiming to make the U.S. dollar as the world’s reserve currency redundant, China’s central bank (the People’s Bank of China – PBC) inked a 3-year currency swap agreement with the European Central Bank (ECB), worth 350 billion Yuan (USD $57 billion).
“The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets,” said the ECB.
The foundation for the currency swap agreement is a $1.3 billion per day trade between Europe and China. The swap will exist as a backstop liquidity facility for all Euro zone national central banks. In other words, China is willing to help fund European economic instability. This will give it considerable clout in trade and commerce negotiations.
The European Commission is also planning to negotiate an investment agreement with China that could pave the way for a Free Trade Agreement between the two entities.
Meanwhile, China’s official news agency, Xinhua heaped criticism and caustic ridicule on Washington for its political stand-off over the budget and debt ceiling, and called for the creation of a “de-Americanised world,” saying that the destiny of people should not be “left in the hands of a hypocritical nation with a dysfunctional government.”
The stalemate in Washington at the time, was affecting China’s dollar denominated investments of various types. China is the biggest foreign owner of U.S. Treasuries ($1.28 trillion as of July 2013).
The paper also called for an end to the use of the US dollar as the international reserve currency, which would reduce exposure to the U.S. dollar.
China aims to make the Yuan a powerful economic force and challenge the U.S. dollar for a larger share of the economic pie. The U.S., for its part, will eventually lose its standing as the world’s reserve currency which will bring greater economic troubles.
“There are not many, even among educators and statesmen, who comprehend the causes that underlie the present state of society. Those who hold the reins of government are not able to solve the problem of moral corruption, poverty, pauperism, and increasing crime. They are struggling in vain to place business operations on a more secure basis. If men would give more heed to the teaching of God’s word, they would find a solution of the problems that perplex them.” Testimonies for the Church, Vol. 9, page 13