2: America has dominated global finance

5: since the end of the second world war

8: when the current system was built.

12: Designed to establish the economic foundations of peace

16: on the bedrock of genuine international cooperation.

21: But the economic disaster caused by the coronavirus pandemic

25: could signal a new chapter in financial history

29: with America's leadership called into question.

33: Covid-19 has shown that America is failing to

36: sort out its own affairs at home, let alone provide global leadership.

39: $484bn for loans, after the first round of funding ran out.

45: Another huge spike in unemployment claims.

47: With a vacuum emerging at the top of the financial order

51: China is vying to compete for greater control.

54: This is not a case of China becoming Wall Street overnight.

58: The crisis has provided China with an opportunity to show.

60: what it's capable of doing, which in the long run will tip the balance of power.

69: In global finance, America is king.

73: It controls the world's financial plumbing

75: and accounts for almost a quarter of the world economy.

79: The dollar makes up most central-bank reserves.

82: and is the currency of international trade.

85: 80% of global supply chains use dollars,.

89: which gives America significant power.

92: Whoever controls the flows of money at the end of the day.

96: controls a lot of things in the economy.

99: and ends up being the puppet master of a lot of.

102: things that go on around the world.

104: China hopes to correct this imbalance.

106: There is a growing call from the international community.

111: for reforming the global-economic-governance system,.

115: which is a pressing task for us.

118: It already has the world's second-largest economy.

121: its banks are enormous.

123: The banking sector has been growing fairly steadily for the past ten years

128: While in America, bank assets have remained relatively stable.

132: And with European banks' assets falling.

134: Chinese banks now have more assets than those in Europe or America

139: But most of their business is within China

143: Chinese banks account for only 7% of cross-border lending

147: So the banks' vast size hasn't translated.

151: into influence within the world's financial system.

154: yet

155: Its banks are becoming more active overseas

160: They are lending to companies, in particular.

162: Chinese companies that are globalising

164: China is also giving its own currency a more prominent role

168: In commodities markets, it has convinced.

171: a few companies to use the currency

173: Rio Tinto, which is one of the largest iron-ore miners in the world.

176: issued its first contracts in yuan last year

181: The covid-19 pandemic could increase China's financial influence

188: China is now sharing its experience with the rest of the world.

191: and providing much-needed supplies

193: 30 tonnes of equipment to Italy, 500,000 surgical masks to Spain

199: Following the outbreak in Wuhan.

201: China has positioned itself as a global leader.

204: containing the outbreak.

205: agreeing to deals to suspend repayment some of its loans.

209: and charging ahead with vaccine development

213: The covid crisis, at least so far, has cast a negative shadow.

218: on the capacity for leadership of America

220: It did not try or even show interest in.

223: marshalling a global response to this crisis

225: It's going to disappear one day, it's like a miracle, it will disappear

229: This could offer an opportunity for China because.

233: it's tried to fill the vacuum that America has left in terms of global leadership

238: China's tough response to the crisis.

240: and the growing size and depth of its financial markets.

244: have helped convince investors it's a safe bet.

247: even as covid sent other markets crashing

251: While emerging markets saw the value of bonds plummet earlier this year

255: China's government bonds remained stable.

258: which is a good gauge of trust in a country's economy

263: So, China has the second-biggest bond market in the world

267: Covid provided the first tests that this bond market could resist a crisis.

271: in a way that typically emerging-market bonds don't

276: It shows investors trust China as an economy.

279: that they don't think it's going to collapse overnight

283: As well as improving its reputation with international investors.

287: China hopes to increase its hold over how money moves around the world

293: America has huge influence over the current system, thanks to SWIFT.

297: the world's largest network for transferring money

301: It's a messaging system that allows financial institutions to communicate

306: It's meant to be geopolitically neutral

309: But because a majority of SWIFT transactions are in dollars.

313: and these are routed through New York.

315: America has used the system to choke its adversaries

320: Russia feared being excluded after its invasion of Crimea.

324: and some Iranian banks were blocked from using the system in 2018.

329: to enforce US sanctions

333: So, SWIFT is based in Belgium

335: So, it's supposed to be neutral. However, America has a strong influence over it

341: America can also threaten SWIFT with sanctions.

344: if SWIFT does not do what America wants

347: This is very upsetting for its allies.

350: which would rather the system stays neutral.

352: and for the benefit of everyone

355: For now China can't hope to challenge America's dominance of SWIFT

360: Instead, Chinese companies are targeting.

362: a different part of the financial system.

365: the way in which consumers spend their money

369: Most consumer payments rely on American giants Visa and Mastercard

374: But Chinese tech companies have developed a series of apps.

378: that disrupt this system

381: Rather than using bank accounts or credit cards for transactions.

385: consumers load money into "digital wallets"

388: Consumers can then do almost anything.

391: from paying parking fines to making investments or ordering taxis.

396: without any of this money flowing through the banks

399: Creating a parallel financial ecosystem

403: This is potentially very disruptive to the financial system

407: It changes the way the money moves around the world

409: It empowers a new set of companies.

411: which are so big that even the Chinese government is scared of them

416: Last year Chinese customers made mobile payments.

419: worth a total of $49trn

423: And the two main Chinese companies offering this tech.

426: Tencent and Ant Financial are enormous, with a billion users each

431: Covid-19 may increase their reach

435: People are doing more shopping online.

437: trying to stay away from cash, which is seen as a potential contaminant

442: And this is all to the benefit of electronic-payment firms

447: Ant Financial and Tencent are already expanding overseas

451: Ant Financial's app Alipay is accepted in 56 countries and regions

457: And other digital-wallet firms are buying into their tech

461: Alipay's QR format has already been adopted by six European mobile wallets

467: America has reasons to be worried about the Chinese giants

471: They are getting bigger in the region because they are investing.

474: their wallets in South-East Asia and beyond

478: And in effect it creates a system that is not reliant on.

482: American companies, American standards, American norms

486: But China faces a major obstacle

489: Much of the world distrusts its intentions

492: China denying a cover-up

494: The top Chinese officials kept it quiet

498: After all, Chinese leaders initially denied and covered up the spread of covid-19

505: There's always a doubt about what is the ultimate objective.

508: that China is pursuing in being so collaborative at the present time

512: It's not always transparent about the truth.

514: and what happens in its own country

517: In a global financial system, you need transparency

519: You need to know the facts, what's going on.

521: to make sure the system is in good health

523: As China's financial sphere of influence grows.

526: it is unclear whether it will complement America's.

529: by creating more competition, or undermine the existing system

534: In the end, what we could see is.

535: the fragmentation of the global financial system in.

538: an America-dominated sphere and a China-dominated sphere

543: These two systems don't have to be mutually exclusive

546: They could actually collaborate with each other

548: If they do, great. If they don't, then it will be harder.

551: to move money around the world

552: It will be a costlier, more dangerous financial system

555: And in the end, most people will lose out

558: China may not become the dominant force in global finance any time soon

563: But covid-19 is helping to fast-track its progress

568: And as the world recovers from the virus.

570: and economies begin to open up.

572: China will be well placed to make significant gains

577: Thanks for watching

578: I'm Matthieu Favas, finance correspondent at The Economist

581: And if you want to read more about how.

583: the covid crisis is going to change the financial system.

586: please click the link opposite