Over the past decade, China's debt has grown significantly and has become one of the biggest challenges for the Chinese administration. Beijing considers the growing level of debt liabilities to be a potential threat to economic stability. China has tried to reduce its dependence on them, but the work in this direction had to be suspended because of the coronavirus pandemic.
The pandemic affected all businesses, and the Chinese authorities were forced to make it easier for companies to receive loans. As a result, in the third quarter of 2020, the level of debt broke a historical record and amounted to almost 290 percent of GDP, according to the Bank for International Settlements.
Other large economies — the United States, Japan, European countries — found themselves in a similar situation during the coronavirus pandemic year, as local authorities also had to help their companies and people cope with the ensuing difficulties.
However, the structure of China's debt is different: more than 160 percent of GDP accounts for the corporate, rather than for the government sector, as in the United States and Japan.
As the economy recovers from the pandemic, China has returned to debt-containment efforts. According to UK's Barclays Bank, the credit growth will slow to 10-10.5 percent by the end of this year, as compared to 13.3 percent in late 2020.
Due to the decision of the Chinese authorities to simplify the process to obtain loans during the coronavirus crisis, the profit of the country's banking system has noticeably decreased. In the fall of 2020, the world's largest credit institution Industrial & Commercial Bank of China (ICBC) faced a shortage of money and a record in the amount of borrowed funds. The crisis in the financial performance of the banking sector in China has thus become the most significant one in the last ten years.
In the meantime, Chen Yiju, a researcher at the Institute of Russia, Eastern Europe and Central Asia of the Chinese Academy of Social Sciences, said in an interview with Huangqiu Shibao newspaper that Russia's desire to ditch the dollar could be a protest against USA's supremacy.
The expert believes that de-dollarization will not affect Russia, since the United States, unlike China and Europe, does not act as Russia's primary trading partner. The Russian currency, the specialist said, is recognized as a stable means of payment.
According to Chen Yiju, the process to replace the US dollar in international settlements will become Moscow's act of travesty of the United States.
If Russia indeed takes real action to refuse from the dollar peg in its economy, the move of the Russian authorities will come as humiliation for Washington, because the United States will thus be put in an "awkward position in front of its allies."
Earlier, Russia's Finance Minister Anton Siluanov announced the plans of the National Welfare Fund (NWF) to completely abandon the American currency. Instead of the dollar, the share of the euro and the yuan will grow, with gold coming in as well.
Kremlin spokesman Dmitry Peskov, in turn, called de-dollarization a permanent process. He noted that the Russian authorities decided to pursue it, because many countries express growing concerns about the reliability of the US dollar as the main reserve currency.
On June 28, the Central Bank of Russia confirmed that the American currency would remain part of the Russian reserves. Elvira Nabiullina, the head of the Central Bank of Russia, noted that the Central Bank took into account the emerging geopolitical risks.
At the same time, Washington has not expressed any concerns about the plans of the authorities of Russia and China to refuse from the US dollar peg in their economies. The head of the US Federal Reserve System Jerome Powell said that the dollar still remains a world-class reserve currency, and there is no other currency that could compete with it.
It is worthy of note that the decision to abandon the US dollar may sharply increase the demand on gold in Russia. It will be impossible to increase gold supplies considerably within a very short amount of time, given that Russia ranks fifth in the world in terms of gold reserves.
Bodies of military personnel with American and Polish chevrons on uniforms were found in Avdiivka, adviser to the head of the Donetsk People's Republic said