Fading US dollar trust threatens world economy, ex-IMF official Zhu Min warns
Former Chinese central banker says military spending, government debt and interest rates are also among risks to financial markets
He noted that the credibility of the US dollar was being challenged as its share of global foreign exchange reserves had fallen to 57 per cent – from 70 per cent in the past.
Zhu added that the US Federal Reserve’s interest rate cuts would be a critical measure for steadying the financial market this year.
“But if the pace of interest rate cuts does not align with the inflation situation, it will create new uncertainties,” he warned.
Zhu said the US continued to run a budget deficit as public spending on social security and medical welfare continued to climb.
“The proportion of short-term debts is rising [in the US] and new debts are being used to pay off old debts,” he said. “Once the market loses confidence, it would trigger a rise in interest rates and financial market turmoil.”
Zhu added that global government debt was expected to reach around 115 per cent of gross domestic product between 2028 and 2030, up from the current 97 per cent – a level he said reflected unsustainable financial risks.
“To stabilise the US dollar, America has proactively developed stablecoins,” he said. However, Zhu noted that actual US dollars accounted for just 10 per cent of the assets backing leading stablecoins USDT and USDC, while the majority was held in less liquid forms such as interbank overnight loans and US Treasuries, which made up 55 per cent, and corporate bonds at 30 per cent.
While US President Donald Trump has promoted stablecoins, the lack of global regulatory coordination and transparency could lead to uncertainty and volatility in the world’s financial markets, he said.
Another worrying sign was growing military spending triggered by political uncertainty. “The world’s military expenses have risen to US$2.7 trillion in recent years, exceeding the US$1.7 trillion in 1988 during the Cold War,” Zhu said, adding that this development marked one of the biggest risks for global security and economic stability.
As for economic development, he said the world economy had consistently recorded low growth as structural damage brought by geopolitical conflict, the Covid-19 pandemic and the global financial crisis of 2008 had yet to be repaired.
Quoting the World Economic Forum’s “Global Risks Report 2026”, Zhu said non-economic factors would play a huge role in the coming decade, including extreme weather, natural resource shortages, network security, political polarisation and geopolitical challenges.
“It highlights that the world is turning away from efficiency, low-cost operations and globalised systems to a place filled with geopolitical confrontations, fake information, political rivalry and climate crisis.”