Derek Chen: De-dollarization will negatively impact Alabama’s economy

On September 7, 2013, during a foreign visit in Kazakhstan, Chinese President Xi Jinping gave a speech at Nazarbayev University in Astana. In his speech, Xi announced that his government would be pursuing a strategy to provide for transportation infrastructure development and deepen trade partnerships with China’s neighbors.

Xi proposed building a new economic belt with China’s neighbors which would essentially act as a new, modern Silk Road. Under this plan, China would finance infrastructure projects and assist other countries with their economic development. This plan would become known as China’s Belt and Road Initiative.

What the Chinese President did not mention during his speech was his government’s ulterior motives with this plan. The Chinese government was not offering assistance to its neighbors out of the kindness of their hearts. Rather, their motivation was far more malicious.

Since the end of the Second World War, the United States Dollar has held the status of being the preeminent reserve currency of the world. The reserve currency is a currency that is used and held in high quantities by banks globally due to its relative stability and liquidity when compared to other currencies. The world has historically had a single dominant reserve currency.

Prior to the Dollar, the British Pound Sterling was the dominant reserve currency. Prior to the Pound, the French Franc held this designation.

Today, when a Japanese company purchases raw materials from an Irish company, the transaction generally does not get settled in either Yen or Euros, Japan and Ireland’s currencies, respectively. Rather, the transaction is generally settled in American Dollars. The Japanese company’s bank in Japan will send money via a correspondent bank in the United States. The correspondent bank in the United States will then send money to the Irish company’s bank in Ireland. Through this process, the Yen will get converted to Dollars and in turn the Dollars are converted to Euros.

The majority of international business transactions are handled in this manner.

With money from international business transactions being settled in the Dollar via American correspondent banks, these transactions all enter the jurisdiction of the United States. With this, the United States is able to interdict funds that hostile nations and groups may wish to utilize to do harm to the United States.

Today our foreign adversaries are attempting to dethrone the Dollar as the preeminent reserve currency. Through an effort commonly known as “De-Dollarization”, our adversaries are attempting to undermine the Dollar, and in turn, America’s power on the world stage. Our adversaries are attempting to establish trade exchanges and channels that operate with currency denominations other than the Dollar.

China has been attempting to establish trade systems denominated in China’s own currency, the Renminbi. In 2023, as part of the Belt and Road Initiative, Chinese state-owned banks signed multiple loan agreements with foreign lenders denominated in the Renminbi.

A large part of China’s Belt and Road Initiative involves providing financing to projects in developing nations around the world where the loan agreement is denominated in the Renminbi. China is providing financing to other countries for road, railway, and port projects with the stipulation that the loans are to be paid back with China’s own currency. The Belt and Road Initiative is a dangerous and nefarious project, designed to undermine the United States, our currency, and our economic strength.

Imagine the devastating consequences America would face if China were successful in dethroning the Dollar and installing their own currency as the preeminent reserve currency. Imagine the dystopia if transactions in international commerce had to go through state-owned banks in China in order for the transactions to be settled.

The Chinese government could then retain and track transaction data from around the world in a similar manner they retain and track transaction data from within China.

If our foreign adversaries are able to successfully strip the Dollar of its status as the preeminent reserve currency, the American economy will suffer devastating consequences. America will lose an important tool in the projection of economic power across the globe. It will be more difficult for American businesses to engage in commerce around the world.

Alabama’s manufacturers employ hundreds of thousands of Alabamians and export tens of billions of dollars’ worth of goods annually. The exports of Alabama made goods are an important part of our economy here in Alabama.

If the Dollar is stripped of its status as the dominant reserve currency, Alabama based businesses will find themselves in a more disadvantageous position.

If De-Dollarization is successful, there will be catastrophic consequences to our economy that will be felt by all Alabamians across our state.

Derek Chen is an Alabama-based attorney and conservative activist. Born in California to Taiwanese immigrants to the United States, he is now a proud resident of Vestavia Hills. He received his JD from Samford University and his MBA from the University of Alabama.