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
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.
You're naming the right variable. Currency sits downstream of capital allocation, and China's real edge is state-directed industrial finance: the https://thesynthesisai.substack.com/p/the-state-investor that built its semiconductor fabs is now leading a 3-to-4 billion dollar round in DeepSeek at a 45-50 billion valuation. Good luck replicating that with a cheap rupee.
More accurately, China has been engaged in open Economic warfare for a decade. Examples include unnecessarily long, strict COVID shutdowns of manufacturing towns and their 2 “random accident” incidents of shipping disruption. Keep in mind the Houthi also allowed their shipping through during Biden’s shipping crisis. Biden’s admin even begin to openly question this but his staff weren’t experienced enough or prepared to address any China+Russia actions in a bold or even necessary way.
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.
You're naming the right variable. Currency sits downstream of capital allocation, and China's real edge is state-directed industrial finance: the https://thesynthesisai.substack.com/p/the-state-investor that built its semiconductor fabs is now leading a 3-to-4 billion dollar round in DeepSeek at a 45-50 billion valuation. Good luck replicating that with a cheap rupee.
More accurately, China has been engaged in open Economic warfare for a decade. Examples include unnecessarily long, strict COVID shutdowns of manufacturing towns and their 2 “random accident” incidents of shipping disruption. Keep in mind the Houthi also allowed their shipping through during Biden’s shipping crisis. Biden’s admin even begin to openly question this but his staff weren’t experienced enough or prepared to address any China+Russia actions in a bold or even necessary way.
https://www.wsj.com/world/russias-vladimir-putin-meets-with-chinese-leader-xi-jinping-in-beijing-11643966743
https://www.bloomberg.com/news/articles/2025-05-08/putin-and-xi-display-partnership-in-russia-to-end-us-led-order