I will wait to see what xhs says before knowing whether this is good good, or good bad
Tagline worthy
Not them, but you can't sell Treasuries without a counterparty. China is only able to sell these because there is a buyer on the other side.
And when China sells Dollars which they obtain from sale of Treasuries for Yuan, the Yuan appreciates in the foreign exchange market. But even here, there is a counterparty, someone must be willing to part with Yuan and accept Dollars, the price moves only.
The thing is, it's still relatively easy even with Trump tariffs to get Dollars, plenty of Americans buying financial and real assets abroad, US runs a trade deficit despite Trump. And countries excluding China have been doing whatever they can to obtain Dollars. Since Yuan appreciates, these countries will have to work harder/get lower goods from China.
Dollar's International dominance will end when countries increase domestic demand and Governments do an export ban, at least some restrictions on the US or if China or some major economy supplies what US is doing currently, which is not happening right now.
Even this doesn't mean the end of the Dollar, USD will continue to be in demand within the US, but US will lose some of the resources, labor extracted from elsewhere (real terms of trade) and prices go up (bad news for Treatlers). But it won't be screwed like Venezuela or Syria. Even lesser tier first world currencies like the British Pound, Polish Zloty etc still have disproportionate privilege.
The dollar will continue getting used in the western world. However, we can already see how BRICS countries are increasingly trading outside the dollar. There's simply no good reason to acquire dollars, then trade them for yuan so you can pay Chinese companies for the things you need. We see this pattern in Africa and other regions right now.
We can look at bilateral currency swap agreements and local currency trade settlements https://www.newscentralasia.net/2026/01/26/bilateral-currency-swap-agreements-and-local-currency-trade-settlements/
The use of the yuan as an international payment currency https://www.stonex.com/en/market-intelligence/use-of-the-chinese-yuan-as-an-international-payment-currency-1508767/
China’s plan to internationalise yuan quietly taking a step forward as Zambia gets on board https://www.scmp.com/news/china/diplomacy/article/3341799/chinas-plan-internationalise-yuan-quietly-takes-step-forward-zambia-gets-board
A discussion on what yuan internationalisation push looks like https://www.scmp.com/economy/china-economy/article/3337438/what-chinas-yuan-internationalisation-push-looks-and-what-may-hold-it-back
And China's central bank has already signed 40 currency swap agreements with foreign counterparts https://english.www.gov.cn/news/202402/16/content_WS65cef3efc6d0868f4e8e40d3.html
Even western regimes are ultimately going to have to trade with China because that's where everything is produced at the end of the day.
trade with China
Pay for the trade how?
You can look at balance of payments data of large countries and it will tell you U.S. and West make up biggest portion of their Trade and Financial Account. Indonesia, Malaysia all these countries earn significant amount of their foreign currencies from the U.S.
China's trade surplus by definition has to be paid for by a capital/financial account surplus, so on the whole it means China (private, public and the central bank) accumulates financial claims on the rest of the world. Since China doesn't supply Yuan in significant amounts (due to capital controls and their policy choices), the large chunk of the claims are in US Dollars, Euros and other first world currencies. In other words, other countries must pay for China's trade surplus somehow.
This can change, for example, if China opens up capital controls, then other countries may borrow from China to buy Chinese goods. What makes Western inflows different is that they purchase some amounts of third world currency assets, like Indonesian Rupiah equities, debt which brings in foreign currencies without debt service risk (at least under a floating currency). If Chinese Government or people were allowed and encouraged to do that this may change.
You're once again missing the forest for the trees by assuming that China holding US dollars is the same thing as China holding US Treasuries. While it is true that a trade surplus creates dollar denominated claims the form those claims take has shifted dramatically. China is no longer content to let those dollars sit in low yield government bonds where they can be frozen by the US Treasury Department at the push of a button. Instead they are funneling that capital into strategic physical assets and alternative financial vehicles that do not show up on the traditional Treasury Department TIC data.
The idea that the US and the West are the only game in town for trade ignores the massive growth in China's trade with the Global South. Beijing is increasingly settled in local currencies or through swap lines that bypass the traditional New York clearinghouse system entirely. When they do earn dollars they are immediately using them to buy up gold reserves or to fund massive infrastructure projects across Southeast Asia and Africa through the Belt and Road Initiative. They are essentially converting paper promises from the US government into tangible ownership of ports and mines and energy grids across the globe.
Furthermore, the argument about capital accounts assumes a static world where the status quo never changes. China is making a very loud statement that they are willing to accept the costs of capital controls in order to maintain their own sovereignty. They are betting that the world is moving toward a system where physical commodities and industrial capacity matter more than holding the debt of a country with an increasingly unstable fiscal trajectory. By diversifying away from Treasuries they are signaling that they would rather hold a basket of real world assets than remain the primary financier for a rival power that is actively trying to contain their growth.
Even if the West remains a significant trade partner the leverage has shifted. If China stops recycling its surplus into the US bond market then the US loses its primary source of cheap credit. We are seeing a scenario where China still gets paid for its goods but the US no longer gets that money back in the form of a loan. This forces the US to find other ways to fund its deficit which inevitably leads to higher domestic interest rates and a more fragile economy regardless of where the trade balance sits.
Invoicing/settlement currency is not the same as source of foreign currency. Net settlement of imbalances have to be done somehow.
And yea, China exported real goods and imported claims on foreigners/foreign assets/
If China sells goods, receives Dollars and then swaps it for gold, or just real assets in Africa then it still means the surplus is settled in foreign assets. If foreigners can't hold CNY assets, then adjustment happens by China holding foreign assets instead. Even if China holds 0 Treasuries, 0 USD assets and only real assets even then a trade surplus country like China is accumulating foreign assets, so the world is not holding financial claims on China, it's still the creditor and Yuan (a financial asset) isn't the asset the world is holding.
And look at what % of total trade is done in/swapped for real assets. I can't find the exact numbers but real assets are more complicated to obtain. Commodities tend to bubble up when you buy too much of it. Keep in mind they have over a trillion dollar trade surplus.
. If China stops recycling its surplus into the US bond market then the US loses its primary source of cheap credit.
Not how credit works, it is rest of the world's demand for US Dollars that results in US having a current account deficit, again rest of the world is willing to accept USD, US fiscal deficits are financed by spending itself. If China and the whole world decides they don't want Treasuries, US domestic holders can buy it instead, and if domestic people don't find yield attractive, the Fed can buy it. Or, Treasury can simply spend without providing free money assets i.e. Treasuries. The real adjustment wouldn't US can't 'finance itself' or whatever but shows up in exchange rates, as I said, Americans will have less foreign goods. And Trump has already done a light version of that with his tariffs.
The argument that China is still recycling its surplus because it holds dollar claims is a classic textbook view that ignores how the plumbing of global finance has been modified in 2025 and 2026. While a trade surplus technically creates a claim on foreigners, the idea that these claims must inevitably return to the US Treasury market is a fantasy from a previous decade. China is no longer content to hold paper claims that can be frozen or devalued. Instead, they are aggressively converting those financial claims into hard claims. When China uses its trade surplus to buy a lithium mine in Africa or a port in Southeast Asia, they aren't recycling credit back to the US government. Instead, they are physically removing that capital from the US financial orbit and locking it into the real economy of the Global South.
The point about net settlement also misses the shift toward a multipolar system. In early 2026, we are seeing the rise of the Unit and bilateral swap lines which allow China to settle its trade imbalances without ever needing a dollar intermediary. If China sells more to Brazil than it buys, it doesn't have to hold USD assets to settle the difference. China can simply hold a balance in a BRICS clearing account backed by gold or use that surplus to fund Brazilian infrastructure projects. The surplus is being settled in tangible, productive assets rather than in the debt of a rival power. This is a strategic decision to control the means of production rather than the means of consumption.
The claim that US domestic holders or the Fed can just buy the debt if the rest of the world walks away is technically true but economically disastrous. If the Fed has to step in as the buyer of last resort to fund a trillion dollar interest bill, it is effectively printing money to pay for past spending. This is the definition of fiscal dominance, where the central bank loses its ability to fight inflation because it is too busy keeping the government from going bankrupt. Domestic holders like pension funds and banks will only buy that debt if the interest rates are high enough to compensate them for the massive inflation risk, which creates a death spiral of rising borrowing costs and slowing economic growth.
The real adjustment isn't just that Americans will simply have fewer foreign goods. The US will lose the ability to run these massive deficits without immediate, painful consequences at home. For eighty years, the US could spend more than it earned because the rest of the world was forced to hold dollars for trade. As China and the BRICS bloc build their own settlement systems, that forced demand is evaporating. We are moving from a world where the US could export its inflation to a world where that inflation stays at home. The US is losing its financial superpower status that subsidized the American way of life since 1945.
Thank you for this o7
this is good for bitcoin
nothing is good for bitcoin as Bitcoin is bad
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