The Yuan vs. the Dollar: China and the United States are Already in a "Hot" War
Abstract
The United States and China are now in a Hot War. This Hot War is named as such because it is a money-centric conflict where speculative money (Le., "Hot" money in FOREX) reigns as an instrument of economic and financial power. Ironically, just as the Cold War symbolically ended with the fall of the Berlin Wall, this Hot War began with another fall: the managed fall of the U.S. Dollar (USD) that began in 2002. As China's economic health improves, its currency is increasing pressured to float from its pegged state. The relationship of the CYN to the USD not only challenges U.S. economic and financial power, but also stresses U.S. national security interests. To fully understand this Hot War, the United States must study the history of the CYN and the pegging and floating processes of the CYN. Understanding this background will enable the United States to comprehend how the Chinese authorities will use this currency instrument in the battles of this Hot War. The battles of this Hot War will be fought over or manifested in several issues: the current account imbalance, economic growth (Chinese and American), regional and external outreach efforts, and the obvious future relationship between these two currencies. To excel in this Hot War the United States must pursue three objectives: maintain a more attractive economy than China, maintain more attractive financial markets than China, and maintain the world's leading reserve currency. To not maintain these positions is to give up shares in the markets of world power and influence and thus to accept unnecessary risk in obtaining U.S. national security goals.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 19, 2005
- Accession Number
- ADA463102
Entities
People
- William R. Daly
Organizations
- Naval War College