There has been a lot of talk about de-dollarization amid the dollar's decline this year. The talk may be overblown. Dollar trading remains dominant, and the share of dollar-denominated assets held by central banks has only slightly decreased over the last few years. There is no dollar crisis, yet there are some concerns that investors should follow.
The dollar was not the dominant currency even when the US became a manufacturing powerhouse at the beginning of the 20th century. It took time to dominate and a world war.
The Chinese cannot become a reserve currency, yet it is clear that it is the key currency for trade finance. Large trade surpluses mean the Chinese are dominating global trade and, with that, require financing for purchases, and importers are having to turn to Chinese funding to get it done. There is demand for the currency because importers may have to pay for goods in renminbi but finance the time between invoicing and the sale of the goods. Importers will be locked in a renminbi system.
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