Introduction
The interview features Chinese economist Keyu Jin (Video) from the London School of Economics discussing China’s strategic preparedness for escalating trade tensions with the United States. The conversation explores China’s systematic efforts to reduce economic dependence on America through diversification of trade partners, currencies, and payment systems, while examining the broader implications of emerging multipolarity in the global economy.
China’s Strategic Plan for Digital Currency and Its Global Impact
China’s digital currency initiative represents one of the most comprehensive and strategically ambitious monetary projects in modern history, designed to fundamentally reshape both domestic payments and international financial architecture. The plan extends far beyond simple digitization of currency to encompass geopolitical, economic, and technological dimensions that could redefine global monetary systems.
Strategic Objectives and Architecture
Domestic Foundation: The Digital Yuan (e-CNY)
China’s digital yuan is a key element in China’s strategy to enhance financial sovereignty, internationalise the yuan, and provide an alternative to cryptocurrencies like Bitcoin. The digital yuan is China’s version of a CBDC, where the People’s Bank of China (PBOC) directly issues digital currency to individuals. Unlike a wholesale CBDC intended for banks and financial institutions, the digital yuan is a retail CBDC designed for everyday transactions. It is pegged 1:1 with the physical yuan, does not bear interest, and is primarily aimed at replacing cash in China’s economy.
The strategic architecture involves multiple layers: The PBOC will delegate most of the responsibilities to the second-tier institutions, which will provide direct service to the customer, assume KYC obligations, and protect their privacy. This creates a sophisticated system where Commercial companies can agree with level 2 or 2.5 institutions on their infrastructure configurations to receive e-CNY payments online and offline.
International Expansion Strategy
China’s global digital currency strategy operates through multiple interconnected channels:
1. Project mBridge – The Technical Foundation Project mBridge was the result of extensive collaboration starting in 2021 between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China and the Hong Kong Monetary Authority. The Saudi Central Bank joined in 2024. The project aimed to tackle some of the key inefficiencies in cross-border payments, including high costs, low speed and operational complexities.
Significantly, China’s digital currency, or e-CNY, was the most issued, and actively transacted token in the $22 million pilot that used CBDCs to settle cross-border trades. A total of 11.8 million yuan ($1.64 million) worth of e-CNY was issued in the testing between Aug 15. and Sept. 23, and the Chinese currency was used in a total of 72 payment and foreign exchange transactions, far greater than the other three currencies each.
2. Belt and Road Integration China is using loans agreed through its Belt and Road Initiative (BRI) to promote the yuan internationally, having already boosted the yuan’s share of global payments to record levels. The China Development Bank, a state policy lender, signed yuan-denominated loan contracts with Malaysia’s Maybank, Egypt’s central bank, and BBVA Peru to support BRI projects. Another policy bank, the Export-Import Bank of China, signed a yuan-based loan agreement with Saudi National Bank, while Bank of China helped Egypt issue Africa’s first yuan-denominated Panda bonds.
By the end of September 2023, 13 Chinese-funded banks had set up more than 145 primary branches in 50 countries along the B&R, while a total of 202 banks from 52 countries and regions have set up institutions in China. According to the RMB Internationalization Report 2023 released by the PBC, China has signed bilateral local currency swap agreements with 30 B&R countries, and has established RMB clearing arrangements in 17 B&R countries.
Technological and Financial Innovation
Cloud Capital Supremacy
The digital currency strategy leverages what analysts call “cloud capital” – the algorithmic AIdriven capital which is not new. It’s been happening now 10 15 years. If you think about it, there is no British or European competitor to Google, to Facebook, to um Amazon.com, to Uber, to Airbnb, to any of these platforms. None. No British, no German, no French, no Indian competitor to them. China has a bigger and better version of each one of them in China.
The integration reaches unprecedented levels through platforms like WeChat: there is an application called WeChat that belongs to Tencent, which imagine an application. We don’t have it here in Europe or in Britain… you don’t have an an app that allows you to watch movies like let Netflix to call a car a cab like Uber to send tweets to do that. And on top of that to send money to pay to make payments for free to anyone in the world for free no fee no banking fee attached that app doesn’t exist in the west the Chinese have it.
Alternative Payment Infrastructure
China’s ambitions for the digital yuan extend beyond its borders. The PBOC is actively involved in Project M-Bridge, a collaboration with the Bank for International Settlements (BIS) and other central banks, including those of the UAE and Saudi Arabia. This project aims to create a platform for cross-border payments using CBDCs, furthering China’s goal of internationalising the yuan.
The technical advantages are substantial: With digital currency, my bank needs neither a Chinese bank account nor a correspondent bank. Nor is there a need for a domestic bank-to-bank payment in China. My bank could go onto mBridge, buy renminbi CBDC on the platform, and transfer the digital currency to the Chinese recipient’s bank directly.
Geopolitical Implications and Dollar Challenge
Recent Geopolitical Developments
A critical development occurred in late 2024: The Bank for International Settlements (BIS) announced its decision to exit the mBridge cross-border payments project, a CBDC initiative in which China has been a key technology contributor. China recently proposed open-sourcing the software, and the Bank of China (Hong Kong) integrated mBridge to enable automated corporate payments. BIS’s exit from mBridge aligns with rising geopolitical tensions and discussion at the BRICS Summit on alternative payment systems.
This development is significant because Josh Lipsky at the Atlantic Council think-tank said the BRICS debate showed payment systems have become a geopolitical issue… “If there’s even a possibility that mBridge could be helpful to those ambitions the West wants no part of it,” Lipsky said. “But it’s fair to ask what the consequences of this decision are. China will surely continue the work, and now the Fed, which is a member of the BIS, will have even less visibility into the project.”
Fundamental Threat to Dollar Dominance
The strategic threat to US financial hegemony operates on multiple levels:
1. Sanctions Circumvention Capability Through hidden backdoors, the Chinese government might have the ability to pull covert triggers designed to unleash consequential disruptions. Furthermore, the development of a financial ecosystem with a sovereign CBDC as its cornerstone would operate as a resilient protective barrier to shield China —to a certain extent— from the threat of Western coercive sanctions, mitigating their domestic and international impacts.
2. Alternative Financial Architecture Adding to worries is the likelihood that BRICS Clear might benefit from technical expertise gained by the People’s Bank of China as a participant in the Bank for International Settlement’s Project mBridge, a cross-border payments platform. Western nations fear that technology for a competing global payments system is now in the hands of those who are outright antagonists if not covert enemies of the west.
3. Digital Financial Ecosystem Integration to the extent that the United States remains hegemonic because they have the monopoly of all payment systems when you pay anybody Even within Britain, that payment finds its way through to the other person, to the person to whom you are making the payment through a system totally controlled by the United States… the Chinese with WeChat and in particular something I haven’t mentioned yet the digital currency of the central bank of China they are creating circumstances that can easily undermine the monopoly that the dollar has on international transactions.
Global Responses and Competitive Dynamics
Western Counter-Strategies
In late January 2025, U.S. President Donald Trump issued an executive order entitled “Strengthening American Leadership in Digital Financial Technology,” which banned the creation of an American CBDC while explicitly promoting the development of “legitimate dollar-backed stablecoins worldwide.” This was quickly followed by the Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 Act (GENIUS Act), introduced to regulate and promote the adoption and use of U.S. stablecoins.
Strategic Stablecoin Development
However, the growing global adoption of dollar-backed stablecoins threatens to reduce China’s leverage in international digital finance. Zhang Ming, the deputy director of China’s National Finance and Development Laboratory economic think tank, published an opinion piece in late March highlighting these concerns among others. In his article, he proposed a three-part strategy to expand the yuan’s influence in the digital realm, to include expanding China’s CBDC, experimenting with Chinese-backed stablecoins, while also leveraging major homegrown fintech platforms to promote the yuan’s global usage.
Current Implementation and Future Outlook
Operational Progress
The Bank for International Settlements (BIS) recently announced that its mBridge cross-border CBDC project had entered the Minimum Viable Product (MVP) stage. It also announced that the central bank of Saudi Arabia had joined China, Hong Kong, the United Arab Emirates and Thailand, becoming the fifth central bank to do so. The Bank of China (NASDAQ: BACHY) confirmed it sent the first transaction between the UAE and China in January. Other confirmed participants include the Agricultural Bank of China (NASDAQ: ACGBY), Bank of Communications (NASDAQ: BCMXY), China Construction Bank (NASDAQ: CICHY), Postal Savings Bank (NASDAQ: PSBKF), ICBC and the China Foreign Exchange Trade System.
Strategic Timeline and Expansion
The Communique of the Third Plenum Third Plenary Session of Central Committee of the CPC earlier this year declared that China will “refine the mechanisms for high-quality cooperation under the Belt and Road Initiative (BRI)”. It is already clear that the BRI is the greatest development initiative in history. The digital currency component represents a critical element of this broader strategic vision.
Long-term Global Impact Assessment
China’s ability to successfully promote its currency using CBDCs will depend heavily on the country’s ability to relax capital controls and maintain the world’s trust in its institutions. China’s geopolitics will play a key role here. However, China’s CBDC launch could bring a period of momentous change in the global financial system. In order to challenge the dollar, China will have to build the payments infrastructure required to facilitate the use of its digital yuan. It will also have to incentivize other countries to adopt its digital currency.
VIDEO: Keyu Jin BREAKS SILENCE On China’s Biggest Trade War With U.S.
Related Sections of Video in Detail
China’s Strategic Decoupling and Diversification (00:00-02:26)
Jin explains that China has been methodically preparing for reduced US exposure through comprehensive diversification beyond just trading partners. This includes investment diversification, alternative currencies, and payment systems. She notes that regardless of which US president is in office, China’s decoupling strategy remains consistent. The Trump tariff wars actually accelerated this process, with over 80% of Chinese companies implementing “going abroad” plans to create non-American foreign markets.
The Resilience Advantage and Trade Redirection (01:23-02:06)
Despite significant trade volumes with America, Jin argues that tariffs hurt both countries, but China has demonstrated superior adaptability. She points to the redirection of trade toward other countries, particularly noting that China’s “new productive forces” like EVs and solar panels have minimal US market exposure. Paradoxically, after Trump’s initial trade war, China actually increased its share of global exports while the US share declined, demonstrating China’s successful pivot strategy.
The Decline of Dollar Hegemony and Alternative Financial Infrastructure (02:44-04:13)
A crucial discussion centers on efforts by China and Russia to escape dollar dominance. Jin reveals that China has established bilateral swap agreements with 40 countries for local currency settlements and is rapidly building alternative payment systems using blockchain technology and digital central bank currencies. She emphasizes this is happening “much faster than we realize” and represents more than mere rhetoric, as emerging markets face dollar shortages and seek diversification options.
China’s Economic Challenges and Internal Focus (04:51-06:17)
Jin addresses widespread perceptions of China’s economic troubles, clarifying that the challenges are primarily domestic rather than trade-war induced. The core issue stems from real estate’s role as both a “shadow fiscal system and shadow financial system.” When real estate declined, it severely impacted local government resources and overall economic stability. However, she argues against “peak China” narratives, citing continued technological innovation and potential for rural population integration into the productive economy.
The Decentralized “Mayor Economy” Innovation Model (08:14-11:03)
A fascinating section details China’s unique governance structure that Jin calls the “mayor economy.” Unlike common perceptions of centralized control, China operates with radical economic decentralization where entrepreneurial mayors compete to support the best private enterprises. These mayors have political incentives to deliver economic results to advance their careers, creating a competitive meritocracy. This system has enabled the creation of multiple “Silicon Valleys” across China, with unicorn companies distributed nationwide rather than concentrated in major cities.
EV and Solar Panel Success Stories (13:16-15:05)
Jin provides detailed examples of how the mayor economy model succeeded in electric vehicles and solar panels. Local governments provide comprehensive support beyond financial subsidies—including talent attraction (subsidizing home purchases for skilled workers), coordinating with local banks, and removing business barriers. The solar panel boom from 2005-2017 particularly demonstrates how policies implemented at different city levels and times directly correlated with patent development and industry growth.
Automation and Demographics Strategy (15:31-17:02)
Addressing demographic concerns, Jin notes that China exports 50% of the world’s robots and could rapidly implement factory automation through its decentralized system. She cites research showing that post-1990, aging countries with automation actually became richer, not poorer, due to technological adoption. China’s mayor economy model could quickly enact system-wide automation changes, as demonstrated by the rapid deployment of 4 million EV charging stations compared to 160,000 in the US.
Generational Transformation and Labor Market Mismatch (17:35-20:35)
Jin describes a significant generational shift in China’s workforce. Unlike previous generations who experienced hardship and were extremely risk-averse and hardworking, younger Chinese consumers spend twice as much on lifestyle goods and prioritize social consciousness, environmental concerns, and minority rights. However, a critical mismatch exists: China has added 100 million college graduates in the past decade, but available jobs are primarily in manufacturing as China positions itself as the “smart manufacturer of the world”—a “larger, smarter Germany” powered by AI rather than following the US financialized model.
US Economic Vulnerabilities and Overestimated Leverage (24:28-29:19)
The discussion shifts to US economic realities, with analysis suggesting America lacks the leverage Trump believes it possesses. US imports represent only 12-13% of worldwide imports, making threats to cut countries out of the US market less effective than 25 years ago. The US operates as both a significant debtor and deficit country, limiting its ability to “call the shots.” China has already substantially diversified away from the US—its exports to America have declined to about $450 billion annually due to a decade of anti-China policies.
The New Bretton Woods System and Digital Currency Competition (32:06-38:26)
A sophisticated analysis explores China’s potential to create an alternative international monetary system anchored by the renminbi, similar to how the US established Bretton Woods in 1944. China’s advantages include being a surplus country with lower interest rates than the US, positioning it to finance global infrastructure and enterprise development. The discussion highlights three fundamental threats to dollar dominance: the shrinking relative weight of the US economy, America’s abuse of dollar privileges through sanctions and foreign reserve confiscation, and primitive Swift clearing technology compared to emerging digital alternatives.
Cloud Capital and Fintech Supremacy (49:31-56:48)
The final major theme identifies what one analyst calls “cloud capital”—algorithmic, AI-driven capital residing in digital platforms—as the core threat China poses to US hegemony. China has developed superior versions of every major US platform (Google, Facebook, Amazon, Uber) plus WeChat, which seamlessly integrates entertainment, transportation, social media, and fee-free international payments. This integrated fintech ecosystem, combined with China’s digital central bank currency, threatens the fundamental basis of US global power: monopoly control over international payment systems.
Conclusion: Transformative Global Financial Implications
With interview reveals that China’s approach to US trade tensions extends far beyond traditional economic responses, encompassing a comprehensive strategy to build alternative global systems while maintaining domestic innovation momentum through decentralized governance. The discussion suggests that rather than merely reacting to US pressure, China is proactively constructing the infrastructure for a multipolar world where American economic dominance is significantly diminished.
China’s digital currency initiative challenges the existing financial order through integrated payment systems, Belt and Road deployment, and alternative settlement mechanisms, building new infrastructure that could reshape global monetary systems.
The mBridge project and BIS withdrawal illustrate how digital currencies have become tools of strategic competition. As countries seek alternatives to Swift-based systems due to sanctions concerns, China’s digital ecosystem offers both technological solutions and alternatives to dollar dominance.
The outcome will hinge on China’s ability to build international trust, while Western stablecoin and CBDC responses shape an emerging multipolar financial landscape. This shift represents both monetary evolution and a fundamental restructuring of global economic power.
5 Key Takeaways:
- Strategic Preparedness Over Reactive Defense: China has been systematically preparing for US decoupling through comprehensive diversification of trade, investment, currencies, and payment systems, regardless of which American president is in office.
- Decentralized Innovation Excellence: China’s “mayor economy” model creates fierce competition among local governments to support the best entrepreneurs, enabling rapid scaling of technologies like EVs and solar panels through coordinated infrastructure deployment.
- Financial System Transformation: China is rapidly building alternative payment infrastructure using blockchain technology, digital currencies, and bilateral swap agreements with 40 countries, directly challenging dollar hegemony faster than most observers realize.
- Generational Economic Shift: China faces a critical labor market mismatch as increasingly educated, consumption-oriented younger generations resist manufacturing jobs, while the country positions itself as the world’s “smart manufacturer” rather than following US financialization models.
- Cloud Capital Supremacy: China’s integration of big tech and finance through platforms like WeChat represents a fundamental threat to US global power, as it provides fee-free international payments and could undermine America’s monopoly on global transaction systems.
References:
- Key Figure: Keyu Jin – Chinese economist and professor at London School of Economics
- Additional Analysis: Commentary from geopolitical analysts on US-China economic competition and global monetary system transitions
- BRICS payment systems, digital central bank currencies, Bretton Woods system, US dollar hegemony, Chinese manufacturing innovation, trade war impacts
