1、 Allianz Research Financial globalization:moving towards a polarized system?The Chinese yuan aiming for financial“co-hegemony”with the US dollar 18 November 2022 EXECUTIVE SUMMARY The Covid-19 crisis and,more recently,the war in Ukraine have led to some re-thinking of financial globalization.In part

2、icular,large emerging countries are showing growing discontent against the Western USD-centered framework1.The rise of the Chinese economy(and its geopolitical assertiveness)seems to make the CNY a natural challenger.We find that since 2009,the CNYs role in the global financial system has nearly dou

3、bled,just surpassing the JPY and GBP.Getting on par with the USD is likely to take much longer,if it is even possible at all.Our analysis is based on a cross-country comparison of the economic size of the country issuing the currency,the credibility of the currency as well as its internationalizatio

4、n level,convertibility and reserve currency status.The next phase of financial globalization could be a polarized system.The rise of the CNY is not only a topic of financial development and diversification,but also geopolitically charged.In an optimistic scenario,global finance could be heading towa

5、rds a multipolar system where economic agents use both the USD and CNY seamlessly.In a pessimistic scenario,two spheres of influence could form(US and USD vs.China and CNY),with little exchanges.The reality could lie between these two extremes as going forward geopolitics is likely to guide economic

6、 trends much more than in the past.However,the path towards a polarized financial system is not straightforward.While progress in Chinas reforms towards capital account liberalization had been fast in the 2000s and early 2010s,there have been some roadblocks.Stronger capital controls were put in pla