Can China topple the dollar?

As MINING.com recently reported, China “will account for 52% of base metals demand in less than four years.”

But that’s not it. The Asian giant recently became the world’s largest importer of oil and is set to overtake India in gold imports.

With such a monster economy, it’s no surprise that the renminbi (RMB) looks like it could topple the US dollar as the global currency for commodities trading.

As a report by the Telegraph puts it, “it is only a matter of time” before this happens.

The US government shutdown and the debt ceiling only contribute to the instability of the dollar. This week, China’s Dagong global credit rating agency downgraded the US by one notch to A-.

As the biggest holder of US Treasury Bonds, China could lose a large chunk of its wealth if the US defaults on its loans.

During the US government shutdown, a commentary on China’s state media outlet called for a “de-Americanised world.”

“As US politicians of both political parties (fail to find a) viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanised world,” news agency Xinhua said, as reported by South China Morning Post.

The commentary advocates for a “new world order” in which all nations “big or small, poor or rich, can have their key interests respected and protected on an equal footing.”

Xinhua also called for the creation of a new international reserve currency.

China’s renminbi is already becoming increasingly popular as a settlement currency. In Australia, some resource companies have begun invoicing directly in Chinese money.

HSBC predicts that by 2015, the renminbi will be the third-largest unit used for trade, the Telegraph reports.

Vincent Chan, head of equity research at Credit Suisse in Hong Kong, told Reuters that Chinese officials “might actually consider accelerating” the process of making renminbi a global currency.

“You strengthen the case of making the renminbi a genuine international currency, because the Americans are unreliable,” said Chan.

But a recent article in Time says China should perhaps temper its rhetoric, considering that it stands to lose enormously should the US dollar crumble. In order to become a global reserve currency China would need to implement extensive reform of its financial sector – something the country is reluctant to do.

Chinese holdings of US treasury bonds leaves it “locked in an embrace from which it is very hard for Beijing to escape,” the Time report concludes.