China

China: Clearly they do want to get away from the dollar, somehow.Here is another, more far-fetched, dystopic and admittedly slightly paranoid Fantasy: In an 'ideal' world, from their point of view, one could imagine that they are ultimately aiming for a new Chinese world economic order, not dissimilar to the way they run China itself: in this order they would continue running surpluses, ever more monopolizing manufacturing, ever more high-tech, in China, and export manufactures  in exchange for commodities. If everything would be denominated in RMB, they could then finance deficit countries via RMB loans, RMB bond issues abroad etc. (plus buying up and bringing under their control everything which stands). 

The US could not print its way out of debt any longer, but Chinese mercantilism would instead face the problem of default by its debtors (similar to Germany in the Eurozone). Might be OK with them,because their creditor power would be greatly enhanced. They could dictate political and economic conditionality in return for bail-outs and so on, especially if they controlled the strategic heights of global production with their SOEs. 

From  a liberal point of view this is not all that attractive a scenario, as the German case shows: German banks' exposure,private investors' losses, financing by German taxpayers, voter dissatisfaction. But for China such a position might be more attractive, since China wants control, global control, first of all, and can squeeze its own masses easily to buy and bribe itself into global control.They do not have to care about the private sector, private investors, or citizens in general. They can squeeze surplus out of them to finance foreigners' deficits, and to finance their own capitalist cronies in the cities, with their long tail of rent-seekers and speculator. They will be reaping huge  monopoly rents and subsidised profits. There would be unimaginable opulence in the cities, and below this a billion of worker ants. That is the secret to the glory of old despotic civilisations: using your own people as slaves.  In this scenario China's strategy is essentially one of world domination (Ernst Stavro Blofeld-style) in completely illiberal atavistic fashion. They use their billions of cheap labour to build global strength. Classic mercantilism: the country's wealth is build to enhance first of all the nations international power (not for individual citizens welfare). You squeeze your people to build global strength. But it is a balancing act: they might rebel at some point if they don't get their grab. So, you have to use global power as well to deliver the minimum for stability in your domestic industrial labour camp: food, work, work, work, and basic housing. So, what China wants is not necessarily proper market returns on foreign investments, but control of foreign resources and key industries as  at almost any prize, to maintain a stable and sufficient flow to keep the domestic labour camp machine rolling, compensating the masses with bread and circus and by restoring China's rightful place at the centre of the world. This might to some be a loss making exercise as to foreign economic interaction, but such a global command economy will allow you to monopolize the commanding heights of economic activity in a new global command economy . If this is sub-optimal in terms of market-based profit, who cares, as long as it puts you in control. From an liberal economic point it would be stupid to create a world of permanently imbalanced creditor-debtor relations. But from a political control point of view it opens the option of a new world tributary system of dominance and subservience, where bail-outs (financed by squeezing your mass population)  can be granted in return for obedience and respect and for accepting a global economic hierarchy centred on Beijing. But of course, all this will only work if you provide the global currency.

 

WH