How covid-19 could change the financial world order

Summary

The video discusses the impact of COVID-19 on the global financial system, highlighting America's dominance since World War II and how China's growing economic power is challenging it. The pandemic exposed America's weaknesses, while China took the opportunity to expand its influence. Despite China's rapid growth in finance and technology, including digital payments, it still faces distrust from the international community. The future of global finance may see the emergence of two spheres of influence: one led by America and another by China, which could either compete or collaborate.

Takeaways

• 🌍 America has dominated global finance since the end of World War II, creating a system based on international cooperation.
• 😷 The coronavirus pandemic has exposed America's struggles with leadership, both domestically and globally, questioning its dominance.
• 💸 China is using the crisis to expand its financial influence, although it is not yet a rival to America in global finance.
• 🏦 Chinese banks have grown in size, now holding more assets than American or European banks, but most of their business remains within China.
• 🧳 China's banks are increasingly active overseas, especially in lending to Chinese companies that are globalizing.
• 💱 China is also promoting its currency, the yuan, in global trade and commodities markets, particularly through deals like Rio Tinto’s yuan contracts.
• 📉 America’s control of SWIFT and global financial flows has allowed it to enforce economic sanctions, but China is creating alternative systems for financial transactions.
• 💻 Chinese tech companies like Tencent and Ant Financial are building a parallel financial ecosystem through mobile payments, potentially disrupting the global financial system.
• 📲 With the rise of digital wallets, companies like Alipay and WeChat Pay are growing their influence, expanding across multiple regions and markets.
• 🤔 China still faces global mistrust due to concerns over transparency, which could hinder its ability to fully challenge America’s financial leadership.

Q & A

What historical event led to America's dominance in global finance?

America's dominance in global finance began after the end of World War II, when the current financial system was built, designed to establish the economic foundations of peace and international cooperation.

How did the COVID-19 pandemic impact America's role in global finance?

The COVID-19 pandemic exposed America's failure to manage its internal affairs, raising questions about its ability to lead on the global stage. This has created uncertainty around its leadership in global finance.

What is China's current standing in the global financial system?

China has the world’s second-largest economy, and its banking sector has grown significantly over the past decade. However, Chinese banks account for only 7% of cross-border lending, meaning their global financial influence is still limited.

How is China attempting to increase its global financial influence?

China is increasing its financial influence by becoming more active in overseas lending, promoting the use of its currency in international markets, and expanding its digital payment systems globally.

What role does the SWIFT system play in America's financial dominance?

SWIFT, the largest global messaging system for transferring money, is dominated by transactions in dollars, giving America significant control over the global financial system and the ability to enforce sanctions.

What alternative financial systems is China developing to challenge America?

China is developing alternative financial systems, particularly through digital wallets and payment apps like Alipay and Tencent's payment platforms, which allow consumers to bypass traditional banking systems.

How has the COVID-19 crisis benefited China in terms of global leadership?

China has used the COVID-19 crisis to enhance its global leadership by providing medical supplies, sharing its pandemic response experience, and showing stability in its financial markets, which attracted international investors.

What are the potential risks of a fragmented global financial system?

A fragmented global financial system, with one sphere dominated by America and another by China, could make it harder to move money around the world, increase costs, and create a more dangerous financial environment.

What obstacles does China face in challenging America's financial dominance?

China faces distrust from the global community due to concerns about transparency and its political intentions. This distrust could hinder its efforts to gain greater control in global finance.

How could China and America collaborate in global finance despite their rivalry?

If China and America collaborate, they could create a more competitive and efficient global financial system. However, if they fail to work together, it could lead to fragmentation, making global finance more costly and difficult to navigate.