A monetary initiative designed to tackle inequality and climate change could benefit China by redesigning global financial and trade institutions and freeing countries from the perpetual pursuit of trade surpluses and foreign exchange reserves, stated the French economist and inequality expert Thomas Piketty.
A study by Piketty and his fellow researchers at the World Inequality Lab, published on Thursday, June 4, presents a fully costed plan to drastically reduce global inequality, finance the green transition, and reform the international financial system, with implementation through trade tariffs and financing through wealth taxes and a publicly owned sovereign wealth fund.
"All the discussion around trade that we have seen with [US president Donald] Trump... all this fear that one sees everywhere, constitutes a very, very serious concern... one of the biggest problems we face today is that we need a new international currency," Piketty stated to the South China Morning Post before the publication of the study.
The currency of the International Monetary Fund
The researchers proposed the creation of a United Nations central bank that will replace the International Monetary Fund (IMF), as well as the issuance of a new international currency, the United Nations Currency (UNC), along with a new international clearing union.
The UNC, which will be based on the Special Drawing Rights (SDR) of the IMF, a basket consisting of the US dollar, the euro, the yuan, the yen, and the pound, would be more stable than any individual currency because no government could devalue it or abandon it, Piketty said, adding that this would eliminate the pressure that has led countries to accumulate trade surpluses as insurance against currency crises since the Asian financial crisis of 1997.
"I do not blame China, because I believe that this strategy of its, namely the accumulation of trade surpluses, constitutes itself a consequence of an international financial system in which everyone is worried about being trapped in a financial crisis, where global financial markets will devour their currency," he stated.
The weaknesses of the postwar monetary order
The discussion opened by Thomas Piketty on the creation of a new international currency under the auspices of the United Nations does not constitute an entirely new idea. On the contrary, it meets a long-standing Chinese problematic regarding the weaknesses of the postwar international monetary system, which relies on the dominance of the US dollar.
The current system was shaped after the Bretton Woods Conference in 1944. Although the direct peg of the dollar to gold was abandoned in 1971, the American currency maintained its role as the primary reserve currency of the planet. The largest part of international trade, cross-border payments, global lending, and foreign exchange reserves continues to rely on the dollar.
This offers significant advantages to the United States.
The American government can finance large fiscal deficits by issuing debt in its own currency, while the global demand for dollars creates a stable demand for American bonds.
The French Minister of Finance Valéry Giscard d'Estaing had already since the 1960s described this situation as an "exorbitant privilege" of the United States.
However, the same system produces structural imbalances as well.
In order for sufficient dollars to exist in the global economy, the United States must over time channel liquidity to the rest of the world through deficits in the balance of payments.
Thomas Piketty
The Triffin dilemma, the trade war and the dollar
This phenomenon is known as the "Triffin dilemma" which was invoked by Stephen Miran, the former head of the council of economic advisers of Donald Trump who was the "architect" of the policy of retaliatory tariffs which he announced on "Liberation Day" on April 2, 2025.
In general, the more the dollar is used internationally, the more the global economy depends on the decisions of American monetary policy.
China directly experienced the consequences of this dependence during the Asian financial crisis of 1997-1998. The collapse of currencies and economies in East Asia led many countries to the conclusion that they had to accumulate huge foreign exchange reserves to protect themselves from future crises.
Since then, China followed a strategy of export-led growth and accumulation of reserves.
In the mid-2010s, Chinese foreign exchange reserves had exceeded 4 trillion dollars, constituting the largest in the world.
Despite the rapid rise of its economic power, China did not officially support that the yuan must replace the dollar as the sole global reserve currency.
On the contrary, in 2009, immediately after the global financial crisis, the then governor of the People's Bank of China, Zhou Xiaochuan, published a highly significant intervention, in which he supported the creation of a supernational reserve currency based on the Special Drawing Rights (SDR) of the International Monetary Fund. His basic argument was that dependence on a national currency creates unavoidable global imbalances.
This position presents striking similarities with what Thomas Piketty supports today.
The French economist considers that the perpetual search for trade surpluses by many countries does not constitute simply an economic policy choice, but a defensive reaction to an unstable international financial environment.
According to him, countries accumulate reserves not because they necessarily desire it, but because they fear that in a crisis the international financial markets may turn against their currency.
The advantages for China
This is why Piketty proposes the creation of a global central bank under the UN and a new international currency that will not belong to any state. In his view, such a currency could be based on a "basket" of major currencies, such as the dollar, the euro, the yuan, the yen, and the sterling, in a manner analogous to the SDR of the IMF.
From the Chinese perspective, such a development would have two important advantages.
First, it would reduce the dependence of the global economy on the monetary policy of the United States.
Second, it would allow China to increase its international influence without assuming the full burden of issuing the global reserve currency.
The convergence of the two approaches leads to a common conclusion: the requirement for the 21st century is not the transition from a unipolar world of the dollar to a unipolar world of the yuan, but the creation of a multilateral monetary system where no country will possess monopoly control of global liquidity.
Such a system, according to its supporters, could reduce international imbalances, limit financial crises, and render the global economy more stable and balanced.
An interesting historical addition is that the idea of a supernational currency does not start either from China or from Piketty.
It had already been proposed by John Maynard Keynes in 1944 at Bretton Woods through the plan for a global currency called Bancor.
The American proposal prevailed then and the dollar became the center of the system.
Essentially, both the Chinese proposal of 2009 and the proposal of Piketty in 2026 can be considered modern versions of the old idea of Keynes.
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