Is China Trying to Become the Next World Power and Attacking Global Markets Through Economic Warfare
Why China's playbook of yuan suppression and consumer squeezing is functional economic warfare, and why the yuan replacing the dollar is fundamentally a misread of how trade works
Every macro thesis you read about China comes back to one question: can the yuan replace the dollar. The answer is no, and the reason is so structural that most analysts who get this wrong are working from a frame that does not actually describe how global trade functions.
In today’s stream, Jaymes and I walked through what China is actually doing, why the yuan suppression playbook is functional economic warfare, and what that means for the cross-border flows that determine where your portfolio gets repriced over the next twelve months. By the end of this, you will know which narratives to ignore, which data points actually move markets, and how to position around the Trump-Xi backroom outcomes that the broader market is still mispricing.
LIVESTREAM RECORDING FROM TODAY:
Today’s Livestream: Main Talking Points
1. Time lags are the structural feature of complex macro systems and the current oil-to-rates transmission is the cleanest example. Crude spiked, rates lagged, and now rates are catching up while crude consolidates. The headline-to-core CPI question is what determines whether the lag completes or unwinds.
2. Interest rates rising and equities not falling is the cleanest resilience signal of the cycle. The S&P pulled back to the CPI level on the rate impulse, which is exactly the level we mapped last week. Anyone who says rates up equals equities down is ignoring the data of the entire trend.
3. IGV outperforming SMH on the day is the equity long short positioning unwind playing out in real time. Hedge funds are short software and long hardware. The unwind is going to be IGV bid while SMH gets sold, not a violent rotation crash.
4. China is running a coordinated economic warfare playbook: yuan suppression, consumer squeezing, and rare earth choke points. They moved currency intervention from the central bank to state owned banks in 2014 to dodge IMF currency manipulation accusations. The three trillion dollar trade surplus did not show up in reserves because the state banks did the buying.
5. The yuan replacing the dollar is fundamentally a misread of how trade works. Every industrializing country exports to the United States and gets dollars. If you exit the dollar system, you exit global trade, US geography, and the US military defense system. There is no functional alternative.
6. China’s consumption is 38 percent of GDP and investment is 42 percent. The US is 68 percent consumption and 24 percent investment. That gap is the structural setup of the entire China playbook. China crushes its consumer to subsidize factories and exports.
7. Hyperliquid making new highs while Bitcoin lags is the uncorrelated returns signal. The Circle and Coinbase AQA V2 catalyst plus the regulatory clarity through ETF launches confirms the structural setup. The 37 dollar stop with new ATH upside is intact and the institutional flow is building.
8. The Larry Ellison Oracle thesis is structurally underpriced because narratives lag price. Ellison owns 40 percent of an S&P 500 company and is swinging his entire net worth on the macro AI capex bet. Once Oracle rips to 400, the narrative shifts and everyone changes their tune.
ORCL risk reward levels here: LINK
Slide Deck and Playbooks
Tomorrow's Livestream: Matching Your Unique Abilities to Your Trading Strategy and Where We Are in Equities, Rates, and FX
Tomorrow, we will break down how to match your unique abilities to the trading strategy you actually run, and why that mismatch is the single biggest reason most traders underperform their own thesis. We then connect that framework directly to where positioning sits right now in equities, rates, and FX, so you can see how to apply it to the current setup.
TOMORROW’S LIVESTREAM: LINK
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I think there is a major attribution problem in this framework.
If China’s export competitiveness were mainly driven by deliberate currency depreciation, the most obvious empirical outcome over the past 20 years should have been a sharply weaker RMB against the dollar. But the opposite happened.
Around 2004, the RMB traded near 8.28 per USD. The Fed’s 2025 annual average exchange rate is around 7.19. In other words, the RMB appreciated by roughly 13% over two decades, while currencies such as the Indian rupee, Indonesian rupiah, Mexican peso, Turkish lira, and Russian ruble depreciated dramatically, in some cases by 60–90%.
If depreciation itself creates export power, India, Indonesia, Turkey, Mexico, or Russia should have become even stronger manufacturing exporters than China. They did not.
This suggests that the key variable is probably not exchange rate, but industrial organization: supply-chain density, infrastructure, engineering scale, industrial finance, logistics, export discipline, manufacturing capex, and long-term state coordination.
A weaker currency can improve price competitiveness temporarily. It cannot, by itself, build EVs, batteries, solar, shipbuilding, chemicals, telecom equipment, and a full manufacturing ecosystem.
Exchange rates affect prices. Industrial systems determine capabilities.
PBOC gold accumulation is the real tell. 224 tonnes official in 2024, unofficial estimates roughly double that. Cross asset implication: structural bid under gold through 2026 regardless of DXY path.