Core Viewpoint - The current dollar system is facing a historic turning point as its three pillars—comprehensive national strength, crisis response capability, and institutional advantages—are simultaneously weakening, providing a strategic window for the development of the renminbi [1][9]. Group 1: Evolution of Global Safe Assets - Safe assets are defined as those that maintain stable nominal returns, high liquidity, and low credit risk during market turmoil [2]. - The International Monetary Fund (IMF) outlines five conditions for safe assets: low credit and market risk, high market liquidity, limited inflation risk, low exchange rate risk, and minimal idiosyncratic risk [2]. - U.S. Treasury bonds are currently viewed as the safest store of value globally, holding a significant share in the safe asset portfolio [2]. Group 2: Historical Support Conditions for Safe Assets - Comprehensive national strength is the fundamental support for a currency to become a global safe asset, as seen in historical examples like Spain, the Netherlands, and the UK [5]. - Crisis response capability is crucial for market trust, demonstrated by historical mechanisms like the Dutch East India Company bond trading and the establishment of the Federal Reserve's global dollar swap network [6]. - Institutional advantages manifest in three areas: rule-making power, control over clearing networks, and liquidity supply dominance, which are essential for maintaining currency hegemony [7]. Group 3: Current Challenges to the Dollar System - The U.S. is experiencing a relative weakening of national strength, with GDP shrinking by 0.3% in Q1 2025 and a manufacturing sector share in GDP dropping to just over 10% [10]. - The frequent use of economic sanctions by the U.S. has damaged institutional credibility, leading to a decline in the dollar's share of global foreign exchange reserves from 72% in 2000 to below 60% currently [11]. - Technological advancements are disrupting traditional institutional advantages, with over 20% of oil trade now conducted in non-dollar settlements and significant progress in digital currency development [12]. Group 4: Strategic Recommendations for the Renminbi - Strengthening comprehensive national strength through high-quality economic development and enhancing competitiveness in high-end manufacturing and digital technology [14]. - Improving crisis response capabilities and market trust by enhancing the liquidity of renminbi assets and reforming the national bond market [15]. - Building a new institutional advantage by coordinating rule-making, clearing, and liquidity supply systems to support the cross-border use of the renminbi [16].

Core Viewpoint - The rising U.S. Treasury yields over the past three years have increased the pressure of cross-border capital outflows from China, impacting the foreign exchange, bond, and stock markets to varying degrees, with the foreign exchange market facing the most pressure. However, the overall impact is manageable due to the limited scale of foreign investment in domestic financial assets [2]. Group 1: U.S. Treasury Market Dynamics - The U.S. Treasury market's status as a global safe asset is supported by the U.S.'s economic and military dominance, the dollar's status as a global currency, and the market's depth and liquidity. While these factors are unlikely to change fundamentally in the short term, variables such as deteriorating fiscal sustainability and geopolitical conflicts are increasing market instability [2][4]. - The demand side for U.S. Treasury investments is influenced by economic growth, inflation expectations, monetary policy, geopolitical factors, and globalization. Financial institutions' trading behaviors can amplify demand fluctuations [6]. Group 2: Supply Side Factors - The supply of U.S. Treasuries is determined by fiscal deficits and existing debt levels, with economic growth, demographics, income inequality, and interest payments affecting the fiscal deficit. Economic slowdowns can reduce fiscal revenues, while an aging population increases social security and healthcare spending burdens [7]. - Historical analysis of U.S. Treasury yields shows distinct phases: - 1965-1982: High inflation phase with yields peaking at 15.8% due to economic growth and oil crises [7]. - 1983-2007: A period of low yields driven by moderate economic growth and increased foreign investment [7]. - 2008-2021: A low growth and low inflation phase where yields fell to historic lows due to quantitative easing and demographic changes [7].