The pandemic lockdowns caused real supply chain issues. Prior to the pandemic, the average business leader had some notion that it was important to diversify supply chains, but it would have cost money to ensure against a hypothetical threat which had never occurred in their lifetimes. The pandemic drove home that supply chain disruption was a real threat and real steps need to be taken to prevent this from this happening again.
The same goes for currency. During times of peace, it is comfortable to maintain money in overseas banks and to hold the sovereign debt of other countries, under the assumption that your money will be safe. But, with the war, we suddenly realize that political risk and currency risk are real. Not that anyone ever considered the ruble a safe haven, but if you had parked any assets in Russia, they would be steadily depreciating. And would be difficult to get out. Meanwhile, while the yuan has not been hit yet, the Ukraine conflict is driving home the risk of holding assets in yuan or inside of China. First off the yuan is only semi-convertible. Next, strict capital controls could prevent you from accessing your money or prevent Chinese entities from servicing foreign debts. And finally, China could be hit with secondary sanctions which could wipe out or freeze an entire fortune.
The dollar and the Euro seem the safest bets in trying times, whereby the Euro has not a fraction the usability of the dollar.
#china #currency #dollar #euro #russia #supplychain
