US economist Barry Eichengreen on reality of de-dollarisation and next currency reshuffle

Barry Eichengreen, a renowned American economist and Professor of Economics and Political Science at the University of California, Berkeley, spoke to SCMP Plus about the current state of de-dollarisation and the potential for a reshuffling of the international monetary system.

The recent surge in discussions on de-dollarisation signifies a genuine structural shift driven by concerns about the sustainability of US public debt and its impact on the dollar's stability. The new concerns revolve around the strength of US political institutions and geopolitical alliances. The fragility of these institutions and the US commitment to alliances like NATO could undermine confidence in the dollar, prompting central banks and governments to explore alternatives.

While China's currency has made significant strides in internationalisation, Eichengreen cautions that it will take many years, possibly decades, for the yuan to catch up with the US dollar. This is primarily due to the US economy's dominance in global trade, which creates network effects that lock in the use of the dollar. However, recent geopolitical developments, such as the US-Iran war, may create opportunities for the yuan to gain traction in global oil and gas trade and other energy-related settlements.

In conclusion, Eichengreen remains optimistic about the potential for a more multipolar monetary system, but acknowledges that significant time and circumstances are required for the yuan to become a significant global currency.