Mereja.Forum

[Abaymado]

The currency war has begun. The U.S. is threatening nations to discourage them from using alternative currencies, especially those supported by BRICS countries. America has imposed tariffs on China, and there are reports that China's economy is struggling—unemployment is rising, and factories are shutting down. However, America is also facing backlash.

If this continues, several outcomes are possible:

• China might invade Taiwan as retaliation against the U.S.

• BRICS could introduce a new shared currency for its members.

• Countries may form bilateral trade agreements to bypass the dollar.

• Chinese goods could see huge discounts to attract buyers from other nations and replace lost U.S. demand.

But two key questions remain:

• Why hasn’t BRICS created a single currency yet?

• Why don’t countries like Ethiopia and China just trade in their own currencies and cut out the dollar?"

[Abaymado]

you can show your brain power by sharing your experience.

[Abaymado]

Why is the Chinese yuan's exchange rate to the US dollar still stable at around 7.2–7.3 (not , while other currencies, like Ethiopia’s birr, keep depreciating?


The Chinese yuan (CNY) maintains a relatively stable exchange rate against the US dollar (around ~7.2–7.3 CNY/USD in 2024, not due to China’s strict capital controls and managed float system, while currencies like Ethiopia’s birr (ETB) keep depreciating because of economic instability, inflation, and lack of reserves. Here’s why:
1. China’s Exchange Rate System: A "Managed Float"

China doesn’t have a fully fixed rate but a crawling peg—the central bank (PBOC) tightly controls the yuan within a narrow band.
How China Keeps the Yuan Stable:

Capital Controls – Limits how much money flows in/out (prevents speculation).
Forex Reserves – China holds $3 trillion in reserves to intervene when needed.
PBOC Sets Daily "Midpoint" – The central bank guides the yuan’s value each morning.
Trade Surplus – China exports more than it imports, earning dollars to support the yuan.

Result: The yuan doesn’t freely float like the euro or yen, so it avoids wild swings.
2. Why Ethiopia’s Birr (ETB) Keeps Falling

Unlike China, Ethiopia faces:
High Inflation (25%+ in 2024) – More money printing → birr loses value.
Low Forex Reserves – Can’t defend the birr like China does the yuan.
Trade Deficit – Imports (fuel, machinery) cost more dollars than exports (coffee, textiles) earn.
Black Market Pressure – Official rate (~56 ETB/USD) is far weaker than the parallel market (~100+ ETB/USD).

Result: The birr depreciates constantly because Ethiopia lacks China’s economic tools.
3. Why Doesn’t China Let the Yuan Depreciate Like Ethiopia?

China could devalue the yuan (as it did in 2015 and 2019), but it avoids doing so for:
✔ Global Trade Stability – A weaker yuan would anger the U.S. (accusations of currency manipulation).
✔ Foreign Debt Risks – Chinese firms borrow in dollars; a weaker yuan makes repayments costlier.
✔ Capital Flight Fears – If investors expect a drop, they’ll pull money out of China.

Ethiopia, meanwhile, has no choice—it lacks reserves and investor confidence to stabilize its currency.
4. Key Difference: Economic Power
Factor China (CNY) Ethiopia (ETB)
Forex Reserves $3 trillion (massive buffer) < $3 billion (critically low)
Inflation ~2% (controlled) ~25% (out of control)
Trade Balance Surplus ($860B in 2023) Deficit (imports > exports)
Policy Control Strict capital controls Weak enforcement
5. Will the Yuan Stay Stable Forever?

Short-term: Yes, China has the tools to keep it steady.

Long-term: If China’s economy slows further, pressure for depreciation will grow—but a sudden crash is unlikely.

Ethiopia’s birr, however, will keep falling until:

Inflation is tamed.

Exports grow.

Forex reserves recover.

Bottom Line

China’s yuan stays stable because it’s artificially controlled by a powerful central bank with huge reserves. Ethiopia’s birr falls because of economic weakness and no safety net.

Thought-provok

ing question: If China one day abandoned capital controls, would the yuan crash like the birr? (The answer is yes, temporarily—but China won’t let that happen.)

[ethiopianunity]

We have lame dunk slave Protestant leadership who is killing Ethiopias home grown economy and growing foreign controlling Ethiopias assets plus Ethiopia opened Bitcoin mining for foreigners, while every country refused because it takes huge mega energy turning off citizens electricity and even home grown industry forced to be shut without electricity . The pp and cadres screaming we are going to be number one is because think like Middle East kingdoms, visually it is developed with building roads and what not, but there is no soul, these citizens do not own their nations but oligarch kingdoms and foreigners. This will happen in Ethiopia where citizens will be used as mercinaries, cheap labor slaves for oligarchs and globalists in their own country

[Abaymado]

For Ethiopia and China (or any two BRICS nations) to trade directly in their local currencies (Ethiopian Birr and Chinese Yuan), they need a system to exchange currencies without relying on the US dollar. Here’s how it works in practice:
Step-by-Step: How Ethiopia Can Trade with China in Yuan/Birr
1. Currency Swap Agreement (CSA) Between Central Banks

What it is: A deal where China’s PBOC and Ethiopia’s central bank agree to exchange a fixed amount of yuan and birr at a pre-determined rate.

Example:

China’s PBOC gives Ethiopia ¥1 billion (yuan).

Ethiopia’s central bank gives China ETB 7 billion (assuming an agreed rate of 1 CNY = 7 ETB).

Why it helps: Ethiopia can use these yuan to pay Chinese exporters directly, avoiding dollar conversions.

2. Direct Exchange Rate (Birr-Yuan) Without USD

Normally, birr and yuan are exchanged via the USD bridge (e.g., 1 ETB → USD → CNY).

Alternative:

The two central banks set a fixed or floating exchange rate for direct birr-yuan trade.

Example: If 1 CNY = 7 ETB, an Ethiopian importer buying Chinese goods pays in birr, and the Chinese exporter receives yuan.

3. Trade Settlement in Local Currencies

Scenario: Ethiopia buys machinery from China worth ¥10 million.

Ethiopian importer pays ETB 70 million (at 1:7 rate) to a local bank.

The Ethiopian bank transfers yuan to the Chinese exporter via a clearing mechanism (e.g., China’s CIPS or a BRICS-backed system).

No USD involved!

4. Handling Trade Imbalances

Problem: If Ethiopia imports more from China than it exports, it will run out of yuan.

Solutions:

Barter trade: Ethiopia pays with goods (e.g., coffee, textiles) instead of currency.

Debt in yuan: Ethiopia borrows yuan from China (but risks debt dependency).

Replenish via swap lines: Renew the currency swap agreement when yuan reserves deplete.

Challenges in Birr-Yuan Trade
1. Exchange Rate Volatility

If the birr depreciates sharply (e.g., due to inflation), China may demand more birr per yuan, hurting Ethiopia.

2. Limited Yuan Acceptance

Chinese exporters prefer yuan, but Ethiopian businesses may struggle to earn yuan (unless they export to China).

3. Lack of Liquidity

Few banks outside China/Ethiopia accept birr-yuan trades, making large transactions difficult.

4. US Dollar Still Dominates Commodities

If Ethiopia buys oil or pharmaceuticals (priced in USD), it still needs dollars, reducing the benefit of yuan trade.

Real-World Examples

Russia-India: After sanctions, India pays for Russian oil in rupees/dirhams.
China-Russia: Over 80% of trade is now in yuan/rubles.
China-Brazil: Some soy and iron ore trades settled in yuan/reais.
Future Solutions for BRICS Local Currency Trade

BRICS Clearing House – A central system to settle multi-currency trades.

Digital Yuan (e-CNY) & CBDCs – Faster cross-border payments without SWIFT.

Gold-Backed Trade – Using gold reserves to stabilize exchange rates.