There has been speculation about a joint coordination between China and Russia for the launch of a new gold-backed currency aimed at eliminating the dollar as the world's major reserve currency.
According to Arab Net, those speculations were increased by China's recent round of buying large quantities of gold on a monthly basis.
Neither country has officially confirmed plans for such a currency, but earlier this year China began buying huge amounts of gold at the same time that Russia was forced to abandon the dollar due to sanctions in response to the invasion of Ukraine. The war also led to the biggest discount to gold prices in years.
Some experts warn that these moves, along with the close relationship that developed between Moscow and Beijing as the rest of the world isolated Russia after the invasion, indicate the possibility of China trying to launch a new gold-backed currency.
Min Huaqiang, a fellow and economic researcher at the Heritage Foundation's Center for Asian Studies, said: The US dollar remains the safest, most convenient and most widely used currency in Asia and the world today. No other currency (backed by gold or otherwise) is comparable, and that is unlikely to change in the near future, according to FOX Business.
The strongest US dollar in 20 years...a double-edged sword
The idea of a joint Russian-Chinese currency has surfaced repeatedly over the past decade, especially after the Russian Central Bank opened its first foreign office in Beijing in 2017.
The Foundation for Defense of Democracies fellow, Craig Singleton, noted that for two decades Chinese leaders have talked about reforming the global financial system and weakening the hegemony of the dollar.
Two elements of that strategy center around the development of the global commodity trading system based on the yuan and efforts by China, in partnership with Russia and other like-minded countries, to challenge the dominance of the dollar by creating a new reserve currency, Singleton told Fox.
In essence, he added, Beijing and Moscow seek to build their own sphere of influence and currency unity within that sphere, in effect immunizing themselves from the threat of US sanctions.
But the record amount of gold China has bought has raised some eyebrows, even as the trend continues under the radar of the mainstream media: Swiss gold exports to China hit a 5-year high, with Beijing in July alone receiving 80.1 tons of gold worth at around 4.6 billion dollars - more than double the 32.5 tons purchased in June, the second highest monthly figure since 2012, according to Reuters.
International Financial Statistics from March 2022 indicated that China may hold the seventh largest gold reserves, with more arriving each month.
Asia Markets trading expert Francis Hunt told that using gold to prop up the currency would be the best way to build confidence in said currency, and that it could be digital in nature to give China more scrutiny of the activity of its citizens.
But Chiang downplayed the potential success of a new currency because the relatively small trade volume would limit its growth, and that the digital currency would be difficult to promote.
Qiang noted that in August 2022, 43% of global payments were made in US dollars, followed by 34% in euros. The Chinese yuan represented just 2% of all global payments, according to RMB Tracker.
