I really don’t know if I should laugh or cry whenever I read stuff like this. Anyone can really write anything and there will be credulous people who want to believe it to be true. No wonder even multipolar bloggers can become gold and crypto grifters.

First of all, this is all predicated on the fact that China has a huge trade surplus from America, because that is the only way China can obtain a huge amount of dollars. On the other hand, America can simply print those money out of thin air. While Global South countries have to endure an entire day’s of hard work for the plantation owner to earn a bottle of drinking water, America (the plantation owner) controls the tap and can pump out as much as it wants at no cost.

Do you know what that means? It means that the hard work of Chinese labor creating goods and services sold to American consumers is being exchanged for a bunch of junk papers, that they don’t know how to spend. This is why the Belt and Road initiative came about - because China didn’t want to keep buying US treasuries and earning a deflating interest on those bonds, and didn’t know what to do with accumulating a whole bunch of junk papers. So they lent them out to other developing countries to help them build their economies - with the caveat that those infrastructure loans are denominated in US dollars.

You can issue USD-denominated bonds to other countries, you can lend it out as Belt and Road infrastructure loans, whatever, it doesn’t change the fact that the US gets free shit simply by printing a bunch of junk papers that you can’t use (Stephanie Kelton was even more incisive about this point: China isn’t even earning junk papers, it’s earning an accounting unit, numbers that only exist in the spreadsheet somewhere on the Federal Reserve. This is how the parasitic capitalism of the US empire freeload upon the rest of the world).

Second of all, it’s even worse now that China is re-dollarizing the world. Monetary sovereignty is key to the preservation of national sovereignty, as evident by how neoliberal capitalism and the liberal free market order over the past 50 years have destroyed the economies of numerous Global South countries (Argentina came to mind immediately with its extremely high external debt).

This is worse than China just building the infrastructure and supply chain in the Global South, it is setting up those Global South exporter countries to be bought up by Wall Street finance capitalists with so much dollar denominated loans and assets. What do you think is going to happen if the US is to go through another 2009 GFC-style recession? American consumption will plunge, and all these export economies will have difficulties selling their goods and services. Because China refuses to give up and even doubled down on its super net exporter status, its consumer base will remain weak and cannot absorb the demand that is needed to save these Global South economies. There is only one outcome from this: IMF comes in and takes a “big bite” on the Global South assets.

Third, all US dollars (with the exception of physical banknotes, coins and the special case of Eurodollar) exists in the US banking system. Did people forget that the US literally just seized $300 billion of Russia’s foreign reserve at a moment’s notice? It doesn’t matter how much US dollars you own, if you don’t control the tap, there is very little you can do about it.

The monetary policy (interest rate) is a valve - all the Federal Reserve has to do is to tune the valve to control the global flow of US dollar. For example, by simply hiking the interest rate to 5%, the Biden administration easily funneled all the international capital back to the US, causing a liquidity crisis in the Global South and brought dozens and dozens of countries to the brink of financial default, famine and energy shortage. That’s because the US controls the dollar tap. China controls the yuan tap, not the dollar tap.

So all these flooding the US with excess dollars to drive up inflation is complete nonsense and simply perpetuating the typical neoliberal myth. Inflation in the US over the past few years was caused by energy price hike due to the war in Ukraine, the supply chain issue caused by Covid and exacerbated during the sanctions against Russia, and monopolists hiking prices taking advantage of the rising energy cost.

So why is China doing this? While we don’t know the real answer, the logical and far more reasonable explanation is that they believe that their export oriented economy cannot be abandoned, and is the way towards saving the economy from low consumption amidst plunging property prices and the local government debt crisis. As such, propping up the dollar becomes imperative to sustain the Chinese export economy (US-China trade is transacted in dollar), and attracting FDI (foreign direct investment) has become a short-medium term goal accompanied by the new monetary easing policies.

Only two countries benefit from the current global economic arrangement: the US (by being a super importer) and China (by being a super exporter). No wonder China isn’t ready to give up its exporter status and embrace a Bancor-like system that a number of BRICS+ member states have been keen on getting to. For the Chinese libs, they prefer to flirt with the US imperialists than to forge a radical and transformative path forward.

In other words, the liberal faction has won out. This is going to “save” China’s economy in the short-medium term, but it also gives the parasitic finance capitalism of the US empire a breathing room to reinvigorate itself. This can prove to be fatal in the long run.

So what should China do then?

First, China should prioritize on de-dollarization, not the opposite that it is doing now. To do so, it needs to transition from its export-oriented economy into a domestic consumption model. This will allow the yuan to be internationalized (giving up its net exporter status) and be used to build the productive capacity of the Global South through a Marshall Plan style “yuanization” of the Global South countries.

This means instead of investing in export manufacturing industries, China will invest in high tech manufacturing, R&D, universal healthcare, quality education and many others that improve the living standards of its citizens. Currently, China largely finances its domestic sectors through export revenues (monetary base determined by how much foreign currencies it earn). This allows them to keep their GDP deficit spending to 3% and below (a neoliberal dogma that must be obeyed at all times! - meanwhile the US ignores its own rules and deficit spends 7-8% GDP, and all the people who predicted this would crash the US economy over the past two years turned out to be dead wrong)

Instead, China should drive up its government deficit (central/state bank spending) to directly invest in these sectors. This will also allow the huge Chinese consumer base to absorb the goods and services produced in the Global South when the US and Western economies go into recession, since the plunge in consumption in the West has to be made up by someone else - and China would play an important role in sustaining the global economy.

Importantly, China can also use its huge US dollar reserve ($800 billion) to pay back the Global South debt (e.g. Africa’s $800 billion dollar-denominated debt). Unlike what has been speculated in this article (China flooding Global South with liquid dollars to help them pay their debt, which is bad), China using its foreign reserve to pay back Global South debt will also destroy a huge amount of dollars in circulation in the world (which is good). This can create a temporary vacuum in the dollar hegemony that then enables China to flood the world with yuan (not dollars!) and help them build their economies.

This is how you can fight US monetary imperialism (or at least one of the ways that seem quite realistic, as long as it doesn’t escalate into a global thermonuclear war). As Michael Hudson has mentioned recently, only Marxism/MMT can help us see through the designs of the parasitic finance capitalism of the US empire. Following the Western neoclassical theories will only end up doing the bidding for US imperialism without being aware of it.