Tensions between China and the United States are escalating once again—and this time, it’s not just about tariffs. While trade duties remain a key battleground, the deeper shift lies in China’s push to challenge U.S. financial dominance on the global stage.
Washington’s Strategic Pressure
U.S. officials, most notably Treasury Secretary Besson, have been ramping up pressure on multilateral institutions to curtail support for China. Besson has long argued that Beijing must rebalance its economy: manufacture less, consume more, and open its markets to U.S. exports. On the surface, that sounds fair. But Beijing can—and is—playing by its own rules.
In a subtle but strategic move, Besson recently urged the Asian Development Bank (ADB) to stop issuing loans to China, aiming to curb financing for Beijing’s overseas ventures. While China isn’t strapped for cash—its trade surplus exceeds $1 trillion—access to global capital still provides critical leverage.
This wasn’t an isolated action. Besson also pressed the World Bank and IMF to reconsider their lending policies toward China, effectively demanding alignment with U.S. geopolitical goals. He even tied Congressional approval of Biden’s $4 billion in international funding to those reforms, signaling that U.S. financial aid now comes with political strings attached.
These tactics reflect a broader strategy: use U.S. influence in global finance to contain China’s rise. But Beijing isn’t sitting still.
Enter the AIIB: China’s Financial Counteroffensive
Beijing is fighting back—quietly, but effectively—through the Asian Infrastructure Investment Bank (AIIB), a multilateral institution launched in 2016. With plans to open new offices in Singapore and Hong Kong, the AIIB is expanding its reach into Asia’s top financial centers.
In the world of finance, the lender often dictates the terms. China, long a borrower in the U.S.-dominated system, is positioning itself as a major creditor through the AIIB.
Three things to know about the AIIB:
1. It’s a serious player – With over $57 billion in assets and nearly $52 billion committed across 38 countries, the AIIB is no lightweight. Unsurprisingly, the U.S. is not a member—and likely never will be.
2. China holds the reins – With 26% of voting power, China can veto key decisions, mirroring the U.S. role in the IMF.
3. Its lending is strategic – Many AIIB-backed projects align with China’s Belt and Road Initiative (BRI), channeling capital into sectors like energy and transportation to support Chinese exports and influence.
A prime example: a $75 million loan to Uzbekistan for wind energy and battery storage. From the involvement of PowerChina to the likely use of Chinese turbines and batteries from CATL or BYD, the deal doubles as a vehicle to promote Chinese technology abroad.
In short, China is using the AIIB to build influence, drive industrial exports, and chip away at U.S. financial hegemony.
The Golden Hedge: China’s Shift from Dollars to Gold
China’s strategy goes beyond loans. It’s also rebalancing its foreign reserves away from U.S. assets and into gold. In the past year, the People’s Bank of China added 127 metric tons of gold, hitting an 11-month high. This isn’t speculation—it’s strategic.
Gold provides insulation against sanctions and Western financial tools. China’s central bank has increased import quotas and encouraged major commercial banks to boost gold reserves. Meanwhile, Chinese citizens—facing domestic property market volatility and wary of U.S. assets—are doing the same.
China’s middle class continues to expand, and with the real estate sector yet to find a clear bottom, many households are turning to gold as a preferred store of value. In 2024, domestic gold prices surged by 28%, making it one of the best-performing assets in the country. This surge has spurred a wave of gold investment across China, including in smaller cities. New gold shops are opening to meet demand—even in places like Hekou, a small city in Yunnan Province.
In parallel, China has reduced its holdings of U.S. Treasuries from over $1.1 trillion to just $760 billion over the past five years. The message: China no longer wants to bankroll efforts to contain its own rise.
Global Finance, Rewired
Through the AIIB and broader de-dollarization, China is executing a multipronged strategy:
1. Build global influence by financing infrastructure in partner countries.
2. Undermine dollar dominance by settling more trade in renminbi (RMB).
3. Support its industrial base by tying overseas development to Chinese supply chains.
At the China-ASEAN-Gulf Summit, Beijing floated the idea of a new “dynamic economic circle.” The goal: to offer countries an alternative to the U.S.-led financial order.
While Washington turns inward with tariffs and protectionism, China is extending its reach—loan by loan, gold bar by gold bar.
Manufacturing Muscle: Beijing’s Real Advantage
Besson’s call for China to reduce manufacturing may play well in Western capitals, but it doesn’t reflect economic reality. Manufacturing accounts for about 25% of China’s GDP and is central to its growth strategy—especially in the context of U.S. chip and tech sanctions.
Beijing’s response is clear: expand, not retreat. A new “Made in China” strategy is in the works, and the next Five-Year Plan—set for March 2026—is expected to emphasize semiconductors, AI, and robotics.
Unlike the U.S., which has seen its manufacturing base shrink from 30% of GDP in 1990 to just 17.2%, China has maintained its industrial engine. This makes it indispensable in global supply chains—and resistant to isolation strategies like Besson’s “Fortress America” vision.
Why don’t countries like Germany or Japan join the U.S. in sanctioning China? Because doing so would mean sanctioning their own supply chains.
China’s most talented young people increasingly secure spots at the country’s top, fiercely competitive universities, while less competitive students—often from wealthy families—study at Western institutions, which many in China now see as declining.
In the West, which suffers from a loss of reality, debates rage over whether Chinese students pose national security risks. Meanwhile, Beijing welcomes international students in large numbers, fully aware that hostile governments may send spies or agitators. For example, the CIA is currently attempting to recruit Chinese citizens through targeted social media campaigns.
Chinese universities operate within a highly competitive environment, cultivating graduates equipped for the global stage. This dynamic reflects China’s fiercely contested markets, which consistently produce world-leading enterprises—both envied and feared in the West, as even the Harvard Business Review has noted.
Exports Rising, Tariffs or Not
Even after a property-driven slowdown at home, China’s industrial exporters are surging abroad. Chinese electric trucks and heavy machinery are dramatically cheaper than Western alternatives. Without tariffs, they’d be 50% less expensive—if not more.
The export boom continues, especially to BRICS countries. In Q1 2025, China’s trade with BRICS hit ¥1.5 trillion (roughly $210 billion), up over 11% year-on-year. The message: China no longer depends on the U.S. consumer market.
RMB Ascendant: The De-Dollarization Push
The People’s Bank of China is aggressively pushing RMB settlement in trade. The mandated ratio has increased from 25% to 40%. In China, this is not a suggestion—it’s a policy directive.
Only 30% of China’s total trade (¥43.8 trillion or $6.1 trillion) is currently settled in RMB. That could rise to 40% by the end of 2025. Each percentage shift reduces global reliance on the dollar—and redirects capital to Chinese markets.
Goldman Sachs estimates that a 1% appreciation in the RMB could lift Chinese equities by 3%. A rising RMB means falling demand for U.S. assets, increasing pressure on U.S. bond yields.
Tesla vs. BYD: A Symbol of the Shift
In the EV space, Tesla is losing ground—fast. Chinese giant BYD has slashed prices by 10–30%, triggering a global price war. In April alone, China sold 1.14 million new energy vehicles. Tesla? Just 60,000.
Even in Europe, BYD is outpacing Tesla despite higher EU tariffs. Chinese automakers are structured for lean margins and scale; Tesla is not. Despite producing cars in China, Tesla still relies on U.S. components—about 10%—and it shows.
Consumers are not interested in the policies of Elon Musk or the Chinese government – they value price and performance. Chinese electric vehicles beat Tesla in both areas.
The Looming Fiscal Reckoning in the U.S.
Amid this global rebalancing, the U.S. faces its own challenges. Years of tax cuts and unchecked spending have pushed the federal deficit to an average of 9% of GDP. In a recession, that could spike to 15%.
China’s de-dollarization efforts only deepen the risks. A global bond bear market may be underway. The last major cycle lasted from 1946 to 1981, with yields rising from 2% to over 15%. We’re five years into a new cycle, and without a downturn, 10-year yields could exceed 5%.
If China succeeds in shifting trade and finance away from the dollar, U.S. policymakers will find themselves with fewer tools and less leverage.
Conclusion: The Balance of Power Is Shifting
China’s strategy is coordinated, calculated, and long-term. It is:
- Using the AIIB and Belt and Road to expand influence,
- Swapping Treasuries for gold to safeguard reserves,
- Replacing dollars with renminbi in trade settlements,
- And doubling down on manufacturing to stay globally competitive.
While Washington resorts to tariffs and loan conditionality, Beijing is building a parallel system—financial, industrial, and geopolitical. The U.S. may still hold the commanding heights of global finance today—but that edge is eroding.
The world is watching. And increasingly, it’s Beijing—not Washington—that’s setting the pace.