China’s economic war against the United States has entered a new and deadlier phase. After gutting U.S. manufacturing under the guise of “free” trade, China is co-opting America’s high-tech dominance by wooing tech giants, like Apple and Google.
Meanwhile, China expands its reach by building out its Belt and Road Initiative (also known as One Belt, One Road), aimed at linking all of Eurasia and Africa together under Chinese-dominated trading routes. As this has occurred, Beijing has taken aim at the very heart of America’s global dominance: the U.S. dollar.
Herein lies the most significant threat to the American-led world order since its inception following the end of World War II. And, unlike previous threats to that order, China’s attempt to kill King Dollar just might work.
Durable Disorder and the 100-Year Marathon Sean McFate makes the case that we are living in an era of “durable disorder” in his new book, The New Rules of War: Victory in the Age of Durable Disorder. McFate also asserts that China is likely already at war with the United States—it’s just that Washington can’t comprehend the style of shadow warfare that Beijing is waging.
In his 2015 book, The Hundred Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower, Michael Pillsbury of the Hudson Institute claims the Chinese Communist Party has identified 2049 as the final year of its shadow war against the United States (which began the moment that Mao defeated the nationalists in the Chinese Civil War in 1949). By 2049, Beijing expects not only to have become an equal power to the United States, but to have displaced the United States as the world’s ba, or hegemon.
Military power is only an ancillary component of China’s grand strategy of displacement and eventual world domination. This is especially shocking, as Washington pours more and more money (that it doesn’t have) into its defense establishment—thinking that a larger military budget will deter upstart rivals such as China from challenging the United States.
For all the money Washington has poured into the Pentagon, however, Beijing remains undeterred. The United States spent $1.5 trillion over 10 years on the F-35 fighter and builds Ford-class supercarriers at a cost of $13 billion each. Meantime, Beijing spends a fraction of that on initiatives aimed at displacing the dollar as the world’s reserve currency and replacing it with China’s renminbi.
Check Your “Exorbitant Privilege” Since 1945, the U.S. dollar has reigned as the world’s reserve currency mainly because oil has been traded in dollars. Former French President Valéry Giscard d’Estaing enviously referred to the dollar’s hegemony as an “exorbitant privilege.” Since then, various countries ranging from rivals, like China and Russia; to “allies,” such as France, have yearned for a multipolar financial system not grounded in the dollar. Such a reality would ensure that the American “hyperpower” was permanently weakened and restrained.
Should the U.S. dollar cease to be the world’s reserve currency then Washington not only would have to reform its absurd spending policies virtually overnight (fat chance of that happening), but America would be on the proverbial hook to quickly repay its vast international debt—which is almost impossible.
With a debt-to-GDP ratio of 100 percent, there is no realistic way for the United States to pay down its debt should those foreign powers demand it. In essence, it would lead to the end of the American world order and it would cause utter chaos in the U.S. socio-economic and political system as America struggled to repay its onerous debt.