China And America Are Building Worlds That Don’t Need Each Other
Breaking up is hard to do — unless you’re China, and you’ve been planning it for years. At its Fourth Plenum meeting, Beijing promised to boost domestic spending, push tech self-reliance, and reach “a significant leap forward” in economic strength by 2035. Behind the slogans, however, China’s already been quietly working to loosen its dependence on the West.
Redback rising: It’s not a clean break yet, but the direction is unmistakable. Over the past five years, Chinese banks have quadrupled their use of the renminbi (aka the yuan) in global finance — reaching over $480B in loans, deposits, and bond investments. The renminbi now accounts for 7.6% of global trade financing, up from nearly zero three years ago, making it the second most-used currency after the US dollar. This year alone, several countries, including Kenya, Angola, and Ethiopia, have swapped their dollar-denominated debts for renminbi-based ones, while Indonesia and Slovenia plan to issue renminbi bonds.
- To support this shift, Beijing’s built a web of offshore clearing banks, swap lines, and its own cross-border payments system called CIPS, which now moves more than $5.7T every quarter.
- China also launched new K visas to let young science and tech grads move to the country without a job offer — a sharp contrast to US plans to hike H-1B fees to $100K and tighten student visa limits.
Show Me The Money (First)
China also said it plans to “vigorously boost consumption” over the next five years, calling for stronger domestic demand to drive growth. The problem? Beijing didn’t mention raising incomes — which is actually how you get people to spend money. The government has tried everything from appliance subsidies to local sports events to spur spending, yet retail sales have barely recovered since the pandemic. Eurasia Group’s Dan Wang called it “just a wishful goal” without fiscal commitment backing it up.
- The meeting reaffirmed China’s 2025 growth target of around 5%, with goals stretching through 2035 — implying annual growth of 4.6%, which Wang said will be “very costly” to achieve.
- Beijing also said it plans to track both gross national income and gross domestic product going forward, though officials didn’t explain what that signals about future priorities.
America’s counterpunch: The US is taking equity stakes in key firms to secure supply chains and curb China dependence — pouring billions into IntelINTC, MP MaterialsMP, and Trilogy MetalsTMQ in a move edging toward state capitalism. Treasury Secretary Scott Bessent said the White House has identified seven critical industries for similar investments, arguing that “when you’re facing a non-market economy like China, you have to exercise industrial policy.” Yet with bipartisan backing and Trump and Xi set to meet in South Korea, any détente may prove short-lived — with both sides showing early signs of drifting further apart.