Coronavirus: China refuses to be beholden to US dollar even as pandemic creates shortage
China is reluctant to project an image to the international community that it needs the United States to provide it with easier access to US dollars, even though the coronavirus pandemic has created a shortage of the currency needed by non-American companies to pay their bills, analysts said.
The US, in turn, is in no hurry to help China solve its economic problems, given the escalating rivalry between the world’s two largest economies.
The result is that if a US dollar shortage in the global financial system continues, and there is no reciprocal currency arrangement – a so-called swap line – between the Chinese and US central banks, it would raise the prospect that China could have to tap into its massive foreign exchange reserves to help pay the nation’s foreign bills.
The US Federal Reserve has unleashed a fresh flood of US dollar liquidity since the beginning of March to keep its economy from suffering lasting damage from the coronavirus pandemic. This included launching aggressive interest rate cuts and a series of nine new initiatives to pump money into the economy.