China violates Malaysian airspace; Share of USD reserves with central banks globally falls to 59%

China violates Malaysian airspace


China has violated Malaysian airspace. The Malaysian air force detected 16 Chinese fighter jets flying within 60 nautical miles off their Sarawak state. This is the region where China is trying to lay its claim as per the 'Nine-dash line'. Not only Malaysia and other countries in the region, but also the international tribunal have rejected this 'Chinese line'.

As usual, China has denied wrongdoing and said that sorties of its airplanes were a part of routine exercise. Infuriated at this behaviour, Malaysia has summoned the Chinese Ambassador to lodge a protest. Malaysia’s Foreign Minister Hishammuddin Hussein said, “Malaysia’s stand is clear – having friendly diplomatic relations with any countries does not mean that we will compromise our national security.” Besides, the Malaysian air force has called the incident “a serious threat to national security and flight safety.”

Malaysia and China are already locked in a dispute over the South China Sea. The tensions in the region have increased since China built several man-made islands and turned them into military outposts. China is thus using hybrid warfare against Malaysia to test and drain its military strength. It is part of similar tactics China uses against all its neighbours, especially Taiwan.

Share of USD reserves with central banks globally falls to 59%


The latest survey by the IMF of the official foreign exchange reserves shows that the share of US Dollar reserves held by central banks globally fell to 59% during the last quarter of 2020 — its lowest level in 25 years. In 1999, this share was 71%.

The Financial Times has said that the biggest single peacetime threat to reserve currency status is economic and financial mismanagement. It has blamed the Federal Reserve for having abandoned its longstanding commitment to tightening policy in anticipation of inflation. President Joe Biden is “going big” with fiscal policy and thus the fear that resultant inflation could undermine the currency is mounting.

Also, Russia will replace $40 billion of US Dollar in its sovereign wealth fund and remove the US Dollar from its investment portfolio entirely. The Russian decision appears geoeconomic in nature. Under rising tensions with the US, Russia is taking this step. In a day Russia will reduce the proportion of US dollars in its fund 35% to 0 while gold will go up to 20%. Also, assets held in the Euro and the Chinese Yuan will increase to 40% and 30%, respectively. The share of the British pound will halve, from 10% to 5%.

Overall, as questions about the reliability of the US Dollar arise, de-dollarization progresses at a fast pace.