Edited by Men Jing and Wei Shen
Chapter 6: Currency wars' between the US and China: where does the EU stand?
As was the case in the 1960s and early 1970s, when the Bretton Woods system collapsed, and the 1980s, when the twin deficits of the United States were again a source of tension, the global financial crisis and its recessionary aftermath (2007-ongoing) have reinvigorated the debate on the possible decline of dollar hegemony (Cohen 2010; Eichengreen 2011; Helleiner and Kirshner 2009). The arguments put forward in the current debate have similar features to earlier disputes on the future of the dollar. Echoing previous complaints about the 'exorbitant privilege' of the US voiced by Giscard d'Estaing and Charles de Gaulle in the 1960s, Zhou Xiaochuan (2009), Governor of the People's Bank of China (PBoC), and Hu Jintao, President of China (McGregor 2011), have openly criticized the centrality of the dollar in the international monetary system (IMS). As was the case with the French leaders, they have highlighted the instabilities associated to the Triffin Dilemma and have proposed an increased use of the Special Drawing Rights (SDR) issued by the International Monetary Fund (IMF) as a possible solution. In addition to these calls, the perceived rise of China as an upcoming world superpower resembles the rise of Japan in the 1980s. China has also developed a successful export-led growth strategy, based in part on a devalued currency, which is perceived to be threatening the world's number one position of the US economy.
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