Is China preparing for the death of the dollar?

From long-term planning for the end of the dollar, China is moving to secure its currency as the dollar finally fails. This article details China’s strategy.

Earlier this week, Chinese regulators advised financial institutions to restrict their holdings of US treasuries “due to concentration risk and market volatility”. But USTs have been trading in a tightening range with diminishing volatility since October 2023. And they have already reduced their holdings in recent years.

We can almost certainly dismiss the idea that the regulators read the charts and are forecasting a breakout on the upside for T-bond yields. More likely, it is driven by deliberate policy: a policy which has evolved from securing both China’s place in the world to protecting the value of its currency.

In this article, we trace the reasoning and history of China’s economic and monetary policies over the last 43 years and show that the replacement of US dollars as her trade settlement medium with her own currency, the yuan, has been deliberate and purposeful. Since October, the policy has accelerated into a final phase actively undermining the value of the dollar leading to its destruction as a fiat currency.