[esics6A]

Creating a parallel financial system will take decades if it's even feasible at all. The entire global economy relies on the US/UK/EU based financial system and has evolved around it for over 75 years. It's not something that can be simply torn out and have a drop in replacement like a software system.

Any alternative system would likely be based in China and that would mean that currencies would be backed by China's debt. China would need to take on debt levels that would leave China in an impossible situation. It would mean crushing levels of taxation that would drain China's wealth to the benefit of nations like Russia. There would be a major imbalance in payments. Russia and other nations would make net gains and China would have net losses. Even seizing assets in these nations China would need to sell the assets internationally using the same US/UK/EU system that provides the liquidity and access to markets.

It would require China to become even more reliant on business with Western nations to fund this system making the whole thing illogical and circular in structure. If the Western nations pulled out of Chinese manufacturing it would mean the US/UK/EU could collapse the whole parallel system over time and make it insolvent.

[jl6]

Can you explain why “owning” the financial system is such a burden? US/UK/EU do not seem to suffer for it.

[kelseyfrog]

Testing my (US-centric) understanding here. But I'll argue that the US does suffer for global dollar dominance in that there is necessarily a US trade deficit whose primary results are the exporting of US manufacturing overseas and the creation of the productivity-wage gap that started in the 1970s.

[mooreds]

This may be a useful link: https://carnegieendowment.org/chinafinancialmarkets/56856

tl;dr: If you want to "own" the financial system, you need to be willing to be an importer of last resort, follow the rule of law, have deep financial markets, a freely exchangable currency, and freely tradeable debt. You also have to be willing to accept either rising debt or unemployment.

These can cause pain to countries who have them. Here's a quote from the piece:

"The one thing both sides agreed on, however, was that the US enjoyed an advantage because of the reserve currency status of the US dollar, with some people even assuming that the US was somehow repressing the ability of Europe, China and Japan to gain the advantage for themselves. No matter how many times the US engaged in policies that tried to shift the benefits to those countries, or these countries engaged in policies that prevented them from receiving the benefits, it was somehow clear to both sides that reserve currency status is a wonderful thing that everyone wants but only the US is allowed to have." (Emphasis mine.)

[Ambolia]

It looks like China has a working alternative since 2015 [1], not sure regarding your other questions if it's in their interests to expand it or not.

[1] https://www.scmp.com/economy/china-economy/article/3168684/w...

[jopsen]

But when China trades with Russia, they often trade in Euro or Dollar..

Would you trust the yen? Or the ruble?

[FpUser]

I think this is FUD. The world has lived without reserved currency controlled by a single country before and it will do it again.

[lostcolony]

At a time with far less globalization. The world will live, sure, but it would definitely be a major change if the movement of goods around the world also necessitated arbitrage due to currency fluctuations in whatever local currency was being used to negotiate its passage at each stage.

[chemeng]

Has it? It’s pretty much been a gold-backed currency making gold the defacto reserve currency. Curious whether the USD has been the only fiat reserve currency.