A Core Pillar Of Western Finance Is Moving Towards China

Added: 2026-05-28

[00:00:00]Welcome everyone to our new channel. For the past 80 years, the world has been run by the Brettwoods framework and everything that has emerged over time came from that agreement. The IMF, the World Bank, the Euro dollar, etc. All meant to funnel control of global monetary and financial systems through the US Treasury. But in the last decade and a half, everything began to change.

[00:00:28]And one of these changes occurred just a few short days ago that is signaling that the end of one era is now upon us and a new era is emerging.

[00:00:38]Yeah. And we thought this was very interesting and to get some understanding and this is not something we would traditionally do in all these videos. We're just starting. We want to make things very clear and build a picture so people understand what X Y and Zed means in the relation to A, B, and C. Anyway, the first point with regards to this is this relates to Eurolear. Now, for anyone who doesn't know, Eurolear basically is a sort of core component of what you might term global financial plumbing. It's a effectively a major security settlement and collateral provider. It handles tens of trillions of euros in assets. And in very simple terms it means institutions, banks, governments etc. uh can buy and sell bonds and securities and in essence euro clear is the is the oil that greases the engine so to speak.

[00:01:39]So it helps with settlement custody, collateral flows and crossborder security transactions. The interesting part as well is it covers all asset types. So bonds, equities, funds, derivatives.

[00:01:56]Uh and obviously it's based as we said a provider of settlement and related security services for crossber transactions that involve domestic international bonds obviously equities as we said derivatives and investment funds. and they offer clients this single point access to post-trade services that covers domestic securities from over 40 markets. Now, I don't want to go into masses of detail as to what that means because it's not really that relevant for the conversation, but it has roughly now 43 trillion euros worth of assets under custody and it processes over 300 million netted transactions per year. That's worth in excess of about 1.2 trillion euros. It has 1.7 million securities held on its books and about 3,800 clients globally. So you get a perspective that this is an important institution. It's not trivial.

[00:03:04]Now another component to this and this deals with the introduction that Ken provided is what happened in the immediate aftermath of the the start of the Ukraine war. And why is this relevant? because obviously there was the freezing of Russian assets in Euroclair and because of that and this isn't a criticism of Euroclair countries began looking at what the United States did in terms of sanctions and freezing assets and and including the Russian central bank and said we need to look at alternatives to the US dollar US Treasury complex as a reserve asset. Gold's one of them, but not entirely. They then started to get very concerned about sanctions exposure being dependent on the dollar and also critically western custodial risk for very obvious reasons. So of course that accelerated the interest in alternative reserve assets. it also with regards to the WAN settlement nonwestern financial architecture and these diversified uh collateral systems and this of course all ties in with the ongoing China strategy. It's very important to emphasize China's not trying to destroy the western financial system. It's actually saying look we don't agree with this. We have problems with the dollar being weaponized for all the reasons everyone knows. So, we're going to build an alternative parallel financial infrastructure. We want to have deeply liquid markets. We want to internationalize the yuan and yuan asset, but in a very gradual way, and they've been doing that for over a decade now. They want to integrate global institutions into Chinese markets but in a very measured way and obviously create long-term financial interdependence but with making sure that you you know you have measures in place that they don't collapse because a western financial institution collapses.

[00:05:17]So the argument is what can euro clear do in this regard that would assist China and is beneficial to both parties and that's a big discussion we'll come on to in the second part of this podcast after Ken gives his introduction on this. Yeah, it's kind of interesting, you know, since Eurocclair is front and center here. Uh, expanding upon it, for probably the last five to 10 years, we have seen an increasing, uh, measure of Euroclear hitting the the airways, whether it's business media, alternative media, business media, etc., etc. But it was only focused on one simple thing.

[00:06:01]Eurolear is where foreigners who were selling aka dumping their treasuries, they would all go through euroclear first. And this is one of the mechanisms that the US Treasury uses to ensure that when all of that debt comes back uh to the US that it doesn't, you know, instantly uh cause high inflation.

[00:06:27]And uh from euroclear we've we've talked about in the past and a number of people have mentioned this that the treasury go through euro clear and then they get put in say the caymans or they get put in Ireland or we have put they never come back to the shore and that's one of the important things that euroclear has done to protect the US dollar as the rest of the world starts to ddollarize. Now with Russia it was an is something else. um Russia and Iran were primarily the two biggest um focal points for US sanctions, the weaponizing of the dollar uh through sanctions and and then later China with tariffs, but it for sanctions to try to use the dollar as a weapon.

[00:07:10]Well, by cutting Russia off from Swift, Russia had no more need for dollars. So anyone then who was who was buying oil especially oil and other resources from Russia they were doing so no longer in dollars. So you started seeing more and more of these countries that were in the past before the Ukraine conflict and the sanctions and the cutting off of Swift took place that used to be OPEC was dollar-based the petro dollar etc. Now it is getting less and less and less and less and uh of course with Russia you're also seeing uh they are transacting a lot in the yuan currency. Well more and more countries that were doing with Russia now are also moving towards China.

[00:07:59]Yeah. So the question the next question and and the most important one in the context of this podcast is what's the implication of Euro Clear who clearly wants to deepen integration with China's financial architecture. That is what this is about because they've announced their intention of doing this and really in essence from their perspective as part of the western financial infrastructure it has to be part of China's capital markets as China opens up those markets because the scalability and the liquidity they just simply can't ignore this anymore and this has major strategic significance and the implication is that euro clear wants to expand support for Chinese government bonds as eligible collateral. That is a huge statement. They're going to have to deepen and will do cooperation with the PBOC and Hong Kong financial infrastructure. We'll going to talk more and more about Hong Kong in other podcasts because it's hugely relevant given it offshore China. The other thing is growing interoperability between European and Chinese settlement systems, the support for yuan denominated bonds and also participation in China's broader internationalization of the yuan to include bonds and yuan denominated debt for example. So this has massive implications and therefore on that basis what does that mean in practical terms as part of China's very public well publicized desire to internationalize the aware note not to become a world reserve currency that's a very important distinction so the argument is by this tie up with euro clear Chinese bonds therefore will be increasingly perceived which they already are as being highquality collateral that can be utilized in international transactions.

[00:10:09]That's going to therefore increase liquidity from a Chinese perspective, institutional acceptance because there is still some resistance in the west as a global reserve, not a world reserve currency. Then it it becomes more and more attractive. that increases the internationalization of the US will accelerate enormously and also a byproduct of all those developments is the dependency on a dollarcentric world continues to become weaker and weaker. This is where the perception is that China is attacking the United States. The United States has destroyed itself as a world reserve currency and they're having a dollarcentric world because of its ridiculous behavior as we've highlighted in other uh channels etc for for many many years. So that in very simple terms is the practical implication of this. So it's win-win. China's very happy about this and Euro Clear sat there going well the world's changing. we're going to have to embrace this new reality. So, their natural concern would be, well, if we don't uh grab a piece of this pie, well, the Chinese will create their own settlement and system, which of course they are anyway, but they'll take all the business. So we want to be part of this new future, this new uh multipolar world in terms of uh how the financial system globally is evolving.

[00:11:51]>> Yeah. do expand on on the significance of this. Um I know things like bonds and interest rates and that they can be quite confusing and quite you know difficult sometimes to comprehend but if you want to really break it down uh there's two types of ways to buy bonds.

[00:12:08]You can buy bonds as an investment.

[00:12:10]Capital investment it gives capital to whatever country that you're buying it from. Panda bonds in this case from that and you get a return on your investment over the maturity of the bond. The other way it is is for international trade.

[00:12:23]The same way that uh nations store and reserve US treasuries. It's a way of holding that currency in this case the R&B uh as as a means within just a simple you know bond document and be able to then utilize the R&B in transactions.

[00:12:44]And when you take a look, Slovenia, Pakistan, these two countries have joined in buying uh up upwards of four billion dollar four billion R&B worth of bonds in March and then in later 1.75 in May. So this year alone, we are starting to see more and more countries get involved with buying these panda bonds.

[00:13:06]Then you have Hungary and Russia. Well, not only do they transact in the R&B, they also operate as a sovereign issuer of pandib bonds globally. So, these countries are more and more accepting transactions in the the yuan, Chinese yuan, the Chinese R&B and they are also uh uh central focuses for issuing pandibons. So you can see instantaneously that China is being able to expand its currency all around the world in several different facets without there being the quote unquote bread and woods or any type of agreement. The world wants a more stable currency and the uh euro clear has recognized this and is wanting to get in on the action.

[00:13:54]>> Yeah. So what's the conclusion with this? Well, there is a broad implication. We know the global financial system is evolving and this is something we're going to discuss as developments happen and so people understand what those developments are and why they're extremely important. And this relates in very very broad terms to multiple reserve uh ecosystems for one of a better word to have multiple settlement options to have regional liquidity hubs to have parallel collateral structures in essence ending this dominant western centric model.

[00:14:36]China's intentions are very clear. They want to be a major poll in a in this totally revamped multi-olar global financial system and it's very clear and eurocle is very very sensible in this regard. They're recognizing that they have to adapt to the rise of China.

[00:15:01]China as a financial hub ai having financial architecture because it's commercial suicide not to do so apart from anything else and this is why this development is hugely significant and it's just another tip of many many icebergs that we're going to cover in the coming weeks months and years to to simplify and demystify what is going on and why what is happening in different parts of the world does relate to us in the west. It is not that you know the the what we're doing in the west has no reference to anything that's happening in other parts of the world in terms of the multipolar world and their financial architecture and more critically what they're doing is going to have a big impact on what happens in the west.

[00:15:53]They're not these little ecosystems that that sort of don't aren't intertwined in any way don't affect each other. They absolutely do. And we're going to uh explain all these things so people have a better understanding and and say it in ways that hopefully people will understand because demystifying a lot of the things in the financial world we feel is very important. And with that we end this podcast. Thank you very much for listening for your initial support which we greatly appreciate. Please like, share, subscribe, hit the notification button, comment. We really appreciate your comment and help us to grow this new channel which of course we will greatly appreciate. And with that, I'll say goodbye.