GUOTAI HAITONG SECURITIES·2026-03-31 13:53Group 1: Conditions for Currency Transition - The international status of a currency reflects the comprehensive strength of its issuing country, which includes economic, trade, and military power[8] - Currency transition requires significant lag and stickiness, meaning a currency can maintain its dominant position even after the issuing country's economic decline[14] - Wars often catalyze the decline of an international currency, leading to increased fiscal burdens and weakened currency credibility[14] - A mature and open financial market is essential for currency internationalization, facilitating trade and capital flows[14] Group 2: Dollar Replacing Pound - The transition from the pound to the dollar occurred in four phases: latent (1870s-1913), loosening (1914-1930), collapse (1931-1944), and termination (1945-1971)[15] - During the latent phase, the U.S. economy began to surpass the UK, with U.S. GDP share rising from approximately 10% in 1870 to 32% by 1913, while the UK's share fell from 60% to 13.6%[16] - The loosening phase saw the dollar emerging as a competitor to the pound, with U.S. overseas assets rising to 36% by 1930, compared to the UK's 44%[24] - The collapse phase marked a significant decline in the pound's status, with its share in global debt dropping from 85.6% to 30.2% by 1944, while the dollar's share rose to 56.6%[38] - The termination phase solidified the dollar's dominance, with its share of global foreign exchange reserves exceeding 70% by 1971, following the end of the Bretton Woods system[41]