How China Is Using the Yuan to Blunt U.S. Sanction Power

The Chinese Communist Party is building an alternative financial system designed to weaken America’s ability to dictate global affairs, the Wall Street Journal wrote on June 24.

For decades, the United States dollar’s dominant role in global commerce has given Washington a sharp and powerful tool for shaping international affairs. Roughly 80 percent of international trade finance is conducted in dollars. And since so much of this passes through the U.S. financial system, U.S. authorities can monitor many international transactions and, when desired, deny access to the dollar.

U.S. authorities can deny access to any country, company or individual they consider to be engaging in destabilizing or unlawful behavior and, thereby, disrupt said country’s, company’s or individual’s economies and businesses. Such sanctions are used as an alternative to direct military confrontation and are generally applied with the goal of altering a party’s actions or forcing them into negotiations.

In some notable cases—such as Libya’s decision to dismantle its weapons programs and the international pressure campaign against apartheid-era South Africa—sanctions have contributed to meaningful policy changes or major political outcomes.

Leaders of nations that oppose the U.S.-led global order despise America’s “sanction tool.” They’ve long sought to bypass the U.S. dollar to reduce their exposure to U.S. sanctions. But avoiding the greenback has proved structurally difficult due to the size of the U.S. economy, the dominance of American markets and the sheer momentum of long-standing worldwide finance practices. As much as anti-American countries have yearned to close the curtain on the U.S.-dominated economic order, or at least insulate themselves from sanctions pressure, no other currency has gained sufficient international trust to serve as a viable alternative.

The Chinese have been working aggressively to change that.

A meaningful move came after the first Trump administration waged its “maximum pressure” campaign on Iran in 2018 to drive its oil exports to zero and make the regime negotiate on its nuclear program and terrorist proxies. China eagerly stepped in and clinched a 25-year pact with Iran that included steady purchases of vast amounts of Iranian oil, with the sales settled not in dollars but in the Chinese yuan. By December 2022, China was buying more than 90 percent of Iran’s oil, taking significant pressure off Iran’s rulers.

The situation has been similar in Russia. The U.S. increased sanctions in early 2022 to punish the nation for its full-scale invasion of Ukraine; again, China quickly stepped in and helped the Russians switch from the dollar to the Chinese yuan for oil sales and other trade. Russian authorities today say more than 90 percent of Russia-China trade is conducted in yuan and Russian rubles, with the Chinese currency believed to account for a strong majority of those transactions.

China is also establishing front companies and secret intermediaries to facilitate still more of such dollar-bypassing trade. Its central bank data says roughly half of its cross-border trade is now settled in yuan—up from virtually zero just 15 years ago. The yuan’s share of worldwide trade settlements has tripled over the last five years, hitting up to 8 percent of the total.

https://twitter.com/Jon_Hartley_/status/2069596539975041323

Many such transactions are settled on China’s yuan-based Cross-Border Interbank Payment System (cips). This is a rival to the swift messaging network often used in support of U.S. and other Western sanctions regimes.

The Chinese Communist Party is also quickly expanding mBridge, a cross-border payments platform launched in 2021 that allows central banks to settle transactions using digital currencies, including a digital yuan. In January, China took the notable step of allowing the digital yuan to accumulate interest, just as central banks earn interest on reserves invested in U.S. treasuries.

All of China’s yuan-denominated systems “make it easier to work around U.S. sanctions,” Josh Lipsky, a former International Monetary Fund official, told the Wall Street Journal. “They cloud the U.S. intelligence community’s ability to see financial flows.”

At present, the U.S. dollar still dominates global finance, and U.S. sanctions remain a powerful tool of economic pressure. But China’s intensifying efforts to internationalize and elevate the yuan are putting more and more pressure on dollar-centric systems. This could help lead to an outcome the Trumpet has long warned about.

Financial Crisis

For more than 5½ decades, we and our forerunner magazine, the Plain Truth, have sounded the alarm about a major financial rupture that will originate in the U.S. and shake the global system, redrawing economic relationships and rebalancing geopolitical power.

In 1968, Plain Truth editor in chief Herbert W. Armstrong described this future economic crisis: “If the dollar is devalued, inflation will almost surely result and eventual economic collapse for the United States” (co-worker letter, March 26, 1968).

Mr. Armstrong’s understanding was founded on biblical prophecies, such as those recorded in Leviticus 26 and Deuteronomy 28, which show that if the people of America and some of its allies refuse to turn to God, He will bring punishment upon their countries. “Those of you who truly believe the prophecies of your Bible know such economic collapse is prophesied to happen!” Mr. Armstrong continued. “… God prophesied a virtual trade war will get underway against the United States and Britain—and how our national economies will falter, and then collapse!”

Trumpet editor in chief Gerald Flurry discusses this trade war in Isaiah’s End-Time Vision, stating that it will be Asian countries working hand-in-hand with European nations to block the U.S. and Britain out of world trade. He writes: “[W]e believe there may be a brief alliance between the German-led Holy Roman Empire and certain Asian powers (Russia, China, Japan—the kings of the east).”

This Asian and European alliance will operate as a “dynamic market of nations,” he writes. They are “going to besiege America, Britain and the Jewish nation.”

In his book Ezekiel—The End-Time Prophet, Mr. Flurry offers more detail about this prophesied trade war and siege: “The United States and Britain are going to be left out in the cold as two gigantic trade blocs, Europe and Asia, mesh together and begin calling the shots in world commerce. These nations … are going to be literally besieged—economically frozen out of world trade!”

This prophecy is recorded in specific Bible passages in Ezekiel 5 and 27, Isaiah 22 and 23 and Revelation 18, and it is fully explained in Mr. Flurry’s free books Isaiah’s End-Time Vision and Ezekiel—The End-Time Prophet.

As China keeps intensifying its efforts to internationalize the yuan and bypass the dollar, the pressure could help precipitate the dollar’s demise and set the international stage for this prophesied siege to occur. Biblical prophecy makes plain that this will bring the world into an era of unprecedented destruction and devastation for the U.S., Britain and Israel—and that the chaos will then spread into the whole world.

Yet there is very good news tied into this looming crisis.

Mankind will survive. Jesus Christ will cut the chaos short and usher the world into a golden era in which all nations of the world are saturated with peace, stability and abundance. He was born to be Ruler in that future world government, as shown in Luke 1:31-33, John 18:36-37 and Revelation 19:11-16. And its establishment is drawing near.