> Doesn't this suggest that we are going to a world in which Chinese renminbi [...] is the new world's reserve currency?

I don't think it is as necessarily as clear as "whoever is the most powerful nation gets to be in charge of the reserve currency." Nor do I think you were necessarily making that assumption.

There are pros and cons to having one's national currency be the world's reserve currency. For one, it provides more liquidity and easier access for US firms to capital markets. On the other hand, it can be argued that the US's trade deficit can be in part attributed to the need for more US dollars to exist(so that other nations can hold them in reserve) than goods it produces. This is called the Triffin Dilemma[1].

Additionally, the trade deficit has an interesting effect, namely the goods traded tend to be commodities which over time because easier and cheaper to produce ie: productivity increases naturally compound over time to lower their manufacturing cost. The CPI changes over the last 20 years[2] clearly indicate that TVs, computers, phones have benefited from productivity increases, while healthcare, education, and childcare have not. The latter group, is both resistant to outsourcing via international trade and (importantly) is resistant to scaling by increased productivity measure. This last component is known as the Baumol Effect[3].

With these in mind, you have a rough guide on what could happen if the Renminbi because the world's reserve currency - China would issue more Renminbi so that others could hold them in reserve, this could impact the US trade deficit, capital could be more difficult to find for US firms(bad for the economy), but US manufacturing could make a comeback(for better or worse), and this could mean fewer US dollars chasing services which could impact the Baumol Effect and shift the trajectory of cost disease. Mirror this for China.

The US, keeping these in mind, would have to make a calculation: is this a net positive or negative? There are, however, other strategies they could pursue. One of the ideas floated around by Keynes (in order to address the factors leading to the Triffin Dilemma) is the creation of the Bancor[4], a supernational unit of account structured to incentivize small trade deficits, or in more recent times the idea of a Carbon coin[5] structured to avoid civilization collapse from climate change.

The issue with the Bancor and Carbon coin is always one of was that a new international clearing union would necessarily need to be created to facilitate Bancor accounting. And the issue with a Carbon coin is fundamentally a coordination problem among central banks and national policy. They simply don't work if you're the only one doing it. And frankly, nations like the US have a difficult time when it comes to accepting a world where they aren't in charge. When faced with the question of a Renminbi-dominated future through inaction, or having to overcome the coordination problem of a supernational unit of accounting, the US finds itself between two seemingly impossible choices.

1. https://www.bis.org/publ/work684.pdf

2. https://i.pinimg.com/originals/88/7f/f0/887ff07f61b1b635ffac...

3. https://en.wikipedia.org/wiki/Baumol_effect

4. https://en.wikipedia.org/wiki/Bancor

5. https://globalcarbonreward.org/carbon-currency/