Powell Says War May Speed China Moves to Insulate Against Dollar
Powell Says War May Speed China Moves to Insulate Against Dollar
(Bloomberg) -- Federal Reserve Chair Jerome Powell said the Ukraine war could have the effect of accelerating China’s moves to develop alternatives to the current dollar-dominated international payments infrastructure.
Powell was questioned Thursday in a Senate Banking Committee hearing on how China might view the U.S.-led efforts to isolate Russia’s economy, especially by damaging its ability to use the dollar.
Senator Jack Reed, a senior Democrat who has focused on China’s rise as a global power, told Powell at the hearing that Beijing will start thinking about “how they can avoid that fate if they get into a similar circumstance” as Russia. China “will look very closely” at the “whole issue of the dollar as the medium of exchange to the world,” said Reed, who chairs the Armed Services Committee.
Reed asked Powell if he was watching the issue and whether he’d report back to Congress on developments and share views on what he thinks might happen. “Yes to all of the above,” Powell said.
Powell said that China has “for some time” been working on the reserve-currency status issues, and been developing a messaging system for international payments that’s like the SWIFT system. The U.S. and European nations have moved to bar Russia from using SWIFT, which is vital to international payments in dollars.
“That’s been going on for some time,” Powell said of Chinese efforts to insulate themselves from what Reed described as “the same thing that they’re observing in Russia now.” Powell added, “But this may change the trajectory.”
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