Advertisement
China economy
EconomyChina Economy

Fading US dollar trust threatens world economy, ex-IMF official Zhu Min warns

Former Chinese central banker says military spending, government debt and interest rates are also among risks to financial markets

2-MIN READ2-MIN
14
Listen
Zhu Min, seen here at the 2025 World Economic Forum in Davos, is the former deputy director of the International Monetary Fund and former deputy governor of the People’s Bank of China. Photo: World Economic Forum/Sandra Blaser
Kandy Wong
Dwindling global trust in the US dollar is one of the most prominent risks facing a vulnerable world economy this year, according to Zhu Min, an ex-deputy director of the International Monetary Fund and former deputy governor of the People’s Bank of China.

He noted that the credibility of the US dollar was being challenged as its share of global foreign exchange reserves had fallen to 57 per cent – from 70 per cent in the past.

Advertisement
On the other hand, “the proportions of gold, the euro and the yuan are rising, reflecting the market’s confidence that the US dollar is dropping”, Zhu wrote in an article for China’s International Finance magazine on Wednesday.

Zhu added that the US Federal Reserve’s interest rate cuts would be a critical measure for steadying the financial market this year.

“But if the pace of interest rate cuts does not align with the inflation situation, it will create new uncertainties,” he warned.

Chinese President Xi Jinping has said that China must build a “strong currency” that can be widely used in international trade, investment and foreign exchange markets and reach the status of a global reserve currency.
As de-dollarisation gathers pace, investors are increasingly turning to alternatives such as gold and emerging markets, including China, in a bid to diversify away from US dollar assets amid concerns about the long-term financial sustainability of the United States.
Advertisement

Zhu said the US continued to run a budget deficit as public spending on social security and medical welfare continued to climb.

“The proportion of short-term debts is rising [in the US] and new debts are being used to pay off old debts,” he said. “Once the market loses confidence, it would trigger a rise in interest rates and financial market turmoil.”

Select Voice
Select Speed
1.00x