China has crafted markets, mechanisms and incentives as the world’s largest buyer of commodities in a bid to free itself from its dependence on the US dollar, but the biggest threat to Washington’s global dollar dominance may well be Washington itself, witnesses said in testimony on Thursday before a key advisory committee to the US Congress.
Economic sanctions and access to US-led global banking systems are a powerful US tool that can be used to great effect, said experts before the US-China Economic and Security Review Commission. And these have proven effective by, for example, deterring Beijing from providing weapons to Iran or Russia.
But their overuse diminishes their effectiveness over time that could eventually provide an opening for China in its patient bid to chip away at US dollar dominance.
“If we have a really rock solid case, that there’s a negative effect to US national security, we should do it,” said Martin Chorzempa, a senior fellow with the Peterson Institute for International Economics.
“Where the real risk of overreach comes is not a specific, small, targeted sanction, but it’s something that has massive spillovers.”
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