The Dollar Standard And The Sino-U.S. Economic Relations

With the deepening degree of the economic and financial globalization, theSino-U.S. economic relations has become increasingly global concerned. First, theSino-U.S. economic relations has become the most important bilateral economicrelationship in the global economic system. It has been formed a increasingly closeeconomic interdependence between the Sino-U.S. economic relations, but theinterdependence has a clear asymmetry. Secondly, the dollar is almost unfetteredworld currency under the dollar standard. U.S. dollar issued by the government torely on credit can be used to purchase goods and services around the world; Theresult of China’s long-term balance of payments surplus, nor is flowing into goldreserve assets, but the accumulation of debt in the United States. In this process, itformed a special economic cycle model between the two countries, which is thatChina export, the United States provided the market; China accumulated thecreditor’s rights and the U.S. accumulated debt.Although asymmetric interdependence between the Sino-U.S. economicrelations has become a consensus, what dose the dollar standard play role in theSino-U.S. economic relations? What dose the dollar standard play role in theSino-U.S. economic relations game strategy? What should China takecountermeasures under the dollar standard? In this paper, these issues will beexplained through in-depth analysis and discussion. This could provide a newperspective and theoretical basis for the study of Sino-U.S. economic relations andprovide reference and basis for the Sino-U.S. economic strategies.This paper begins with a global perspective on the dollar standard by explainingwhy the dollar standard could affect the Sino-U.S. economic relations. For mostcountries, the U.S. dollar is the main reserve currency, their currency exchange ratedirectly or indirectly linked to the U.S. dollar. Meanwhile, the majority of theinternational financial market transactions will be accomplished by dollars as amedium. It is dollar-based in the world, so it is difficult to produce constraints to the dollar. Therefore, the existence of dollar hegemony is an important feature of thedollar standard, which can affect Sino-U.S. economic relations and promote animportant foundation and condition of asymmetric economic relations between thetwo countries. At the same time, the U.S. dollar or the dollar standard plays anobvious role in East Asia and it can have an important impact on the global economicand financial stability, so the dollar standard is a considerable influence factor intoday’s international economic relations. Moreover, the dollar standard is sustainable.Therefore, the dollar standard plays an important role in the world economy.Similarly, the dollar standard will have a major impact on the Sino-U.S.economic relations.Then this paper discussed the impact about the dollar standard tothe "Trade–Funds Circulation " mechanism between China and the United States.The dollar standard is the root cause of the "Trade–Funds Circulation " mechanism.Because of the mechanism, the Sino-U.S. economic relations is inevitablyasymmetrical interdependent.Under the dollar standard, the two countries could get more national intereststhrough the "Trade–Funds Circulation " mechanism, but China ’s dependence on theAmerican economy should be higher. Then this paper analyzes how the dollarstandard system affect Sino-U.S. strategies of the economic interests game in thisasymmetrical dependency. The dollar standard plays an important role in thecomplete information static game (one game) and the complete information dynamicgame (repeated game) process between the Sino-U.S economies. So the existence ofthe dollar standard broke through the " Prisoner’s Dilemma ", making the final resultis beneficial to both countries. However, the asymmetrical interdependence bewteenthe two countries decided U.S. can get more game payment, or be able to obtainbigger game initiative. Because of the dollar standard, the interdependence bewteenthe Sino-U.S. economic relations has been further deepened. In the future,cooperation will be the primary choice in the process of the Sino-U.S. economicgame.However, in the Sino-U.S. economic relations, the impact of the dollar standardon China ’s economic development has both positive and negative aspects. Chinashould adopt a positive policy to reduce the asymmetry of the Sino-U.S. economic interdependence relations, and gain more economic benefits by further strengtheningrelations with the U.S. economy, and reduce the negative impact on the U.S. dollar-based system, and take advantage of the dollar standard system to achieve moreeconomic benefits.Through the analysis and discussion in this paper, the overall conclusions are asfollows:First, due to the dollar hegemony, the dollar standard has an important impact onSino-U.S. economic relations, and promote an important foundation and condition ofasymmetric dependence between China and the United States. Moreover, the leadingrole in East Asia of the dollar standard is relatively more obvious, and the dollarstandard system can have important impact on the global economic and financialstability, and the dollar-based system can be sustained. Therefore, the dollar standardis an important factor affecting the development of Sino-U.S. economic relations.Second, the dollar standard is the root cause of the "Trade–Funds Circulation "mechanism. The trade imbalances and the financial imbalances are the importantfeatures of the "Trade–Funds Circulation " mechanism. The "Trade–FundsCirculation " mechanism is the basis of forming the asymmetrical dependence in theSino-U.S. economic relations.Third, the dollar standard has an important impact on the Sino-U.S. strategies ofthe economic game. In the "Trade–Funds Circulation " mechanism, the dollarstandard played an important role to promote Sino-U.S. to select " win-win" strategy.Since the Sino-U.S. economic interdependence under the dollar standard, cooperationwill be the first choice in the future of Sino-U.S. game strategies. However, theasymmetrical interdependence under the dollar standard made the United States getmore profits in the Sino-U.S. economic game.Fourth, the negative impact of the dollar standard can not be eliminated, so it isthe primary consideration that how to reduce the negative impact of the dollarstandard. However, through the Sino-U.S. economic relations, China has also gainedhuge economic benefits under the dollar standard. So it is also needed to beconsidered that how to further strengthen bilateral economic relations in order to gainmore economic benefits when making policy choices. Specifically, under the dollar standard, these aspects should be considered when making policy choices whichincluding the transformation of economic development mode, the transformation offoreign trade development strategies and the acceleration of financial restructuringprocess.