The “only way that can ever change” the supremacy of the US dollar as a global reserve currency is if there’s a genuine, “long-term alternative,” former chairman of Goldman Sachs Jim O’Neill said.
He told CNBC that China could consider expanding the role of its currency.
“Some people would say, of course, the ultimate weapon would be for China to start selling very large numbers of US bonds… but it would probably hurt, of course, the value of Chinese investments,” O’Neill said.
According to him, a weak yuan will also reduce investor confidence. “I don’t think a renminbi [yuan – Ed.] … devaluation makes a lot of sense at all,” he said.
China could also focus on the growing power of its consumers to strengthen its global position, O’Neill added. He noted that currently, domestic consumption makes up only 40 percent of Chinese GDP, compared to 70 percent in the United States.
“Over the next decade to 20 years, there’s no way the US consumer can continue to be the dominant share… of the US economy… Whereas for China to reach the BRIC-type dream… the Chinese consumers got to continue to rise,” he said.
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O’Neill coined the term BRIC [currently BRICS – Ed.]. He predicted that the four emerging countries (Brazil, Russia, India, and China) were on their way to reshaping the world economy.
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