China views the U.S. military and dollar supremacy as the two pillars that support the United States’s global leadership. Prevailing on either will enable Beijing to replace Washington at the pinnacle of power.
For years, the United States has been on the defensive as China has established its own Renminbi-based payment system and led the BRICS bloc, countering U.S.-led Western democracies.
BRICS members obtain payments in Renminbi through exporting commodities to China. In return, they use the Chinese currency to buy goods from China, such as electric vehicles. That trade cycle has significantly contributed to the Renminbi’s 4 percent share in global payments.
Although the share is still small, the Chinese Communist Party is accustomed to making efforts for decades, if not 100 years, to sabotage the United States, according to China expert Alex Liao. It’s a strategic direction the Party commits to and will remain so, he added.
Beijing also holds a significant amount of U.S. debt. That means the Chinese regime can sell off U.S. treasury bonds to drive up the interest rate the United States has to pay on these debts if no other buyers are able to absorb the volume China releases.
Meanwhile, the U.S. national debt is approaching $37 trillion, and the annual interest expense surpassed defense spending last year. The dollar’s supremacy, based on its status as the world’s reserve currency and the primary currency for global transactions, has enabled the United States to borrow more at a lower cost.
Therefore, everything hangs in the balance if the dollar’s special status is compromised. President Donald Trump was keenly aware of that.
At a Cabinet meeting in early July, the president said BRICS aims to “destroy the dollar so that another country can take over and be the standard.”
“If we lost the world-standard dollar, that would be like losing a war, a major world war,” Trump added. “We would not be the same country any longer.”
Fortunately, a new law enacted on July 18 has neutralized many of the risks.
It’s going to enable a new group of creditors of U.S. Treasurys, with holdings that rival China’s. It also turns the tables on Beijing, potentially rendering the Renminbi irrelevant in global trade, according to Liao.
The GENIUS Act, also known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, defines stablecoins as a means of payment or settlement and establishes a federal regulatory framework for them.
