The China Price

Foreign Affairs | Zongyuan Zoe Liu

Chinese President Xi Jinping instructed senior officials in January 2024 to accelerate China’s transformation into a leading financial power backed by a globally dominant currency. This initiative aims to neutralise American monetary leverage by establishing the renminbi across international trade, investments, and foreign exchange reserves. Weaponised dollar dominance has historically forced foreign economies to adapt to unilateral monetary policy driven by Washington.

Previous challenges—such as France converting dollar reserves into gold in 1965 or Europe launching the euro in 1999—secured only partial autonomy. Financial power requires institutional scale. Beijing now couples vast industrial capacity with expanded military capabilities to reduce external vulnerability. When official journal Qiushi published Xi’s full address in 2026, it codified an explicit benchmark for standardising Chinese international finance. Ultimately, China’s unique combination of economic volume, state direction, and military authority positions it to directly challenge the post-Bretton Woods monetary equilibrium.

Comment

Financial dominance forms the underlying foundation for unilateral sanction enforcement, directly enabling mechanisms like the U.S. Treasury's Office of Foreign Assets Control to restrict adversary trade without firing a shot. Beijing’s strategy to internationalise the renminbi directly targets this secondary economic coercion mechanism. By substituting dollar clearing mechanisms, state-backed trade settlement shields defence industrial supply chains from foreign oversight.

This strategy echoes the 1965 French Ministry of Finance effort under Valéry Giscard d’Estaing to undermine American monetary dominance through systematic gold conversion. France sought to neutralise Washington's exorbitant privilege, yet lacked the bilateral trade volume required to establish an alternative settlement architecture. Beijing, by contrast, leverages its dominance over critical material supply chains to enforce renminbi settlement through the Cross-Border Interbank Payment System.

Strategic Question for Discussion

If Beijing successfully routes bilateral critical material trade through the Cross-Border Interbank Payment System, will U.S. Office of Foreign Assets Control sanctions retain their deterrent capability, or will secondary enforcement mechanisms face structural collapse?

The available evidence points toward a significant degradation of unilateral sanctions authority, particularly regarding dual-use technology and raw material flows. While Western banking networks still handle the majority of global foreign exchange transactions, expanding non-dollar settlement channels systematically restricts visibility for regulatory authorities. Consequently, secondary sanctions will likely lose their structural leverage against state-backed industrial supply networks.

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