That is a very interesting insight to the BRI and its consequences. I'm not exactly sure China's aims are to internationalize the Yuan. Instead, there appears to be a large realignment happening within China's business sector that is focused on upstream supply chain partnerships and ownership. For example, Coffee has been on the rise in China, and with this rise, they have rapidly created processing facilities within China and procured exclusive supply contracts with producers around the world. In the span of two years, China went from the 20th to 6th largest buyer of Brazilian coffee, and that gap is still closing. Four years ago, Brazil exported only $80 million worth of coffee to China, and just two years ago it increased to 280 million, and In June 2024, Luckin Coffee has formalized another $500 million. By the end of 2024, Luckin Coffee doubled down on acquiring 240,000 tones of coffee from Brazil to the tune of 1.5bil. Instead of going to a commodity exchange, they go to the source and negotiate a fully exclusive, right of first refusal contract that guarantees them everything that's being produced. With over a billion people in the country, when tastes shift, they shift big and absolutely saturate supply chains. The buying power of China in these markets drives the prices through the roof and can keep them there for a long time, squeezing western markets.

This becomes an issue, however, when the supply chains are already dominated in an area, pulling the raw materials out to some western processor only to be sold back to China through comity exchanges. Cocoa is an example of this. Africa has shown that it is interested in performing the value added production on the raw Cocoa themselves, instead of selling their product to western companies that will process the product and retain the added value. Countries in the Ivory Coast and Ghana have been seeking funding from China to build new processing plants so they can grow, harvest, and then process the Cocoa right in their own borders, employing more of the citizens and keeping that value within their domestic economy. In return, China is securing long term buying contracts from these new facilities to the tune of 40% of what they produce. The Ivory Coast countries are hoping to sell 100% of the value-added cocoa from their facilities, where previously they were only performing 35% of that labor. As African producers make these direct deals with Chinese firms, it pulls that product off the market for the west and slows business for their processing plants. Swiss companies have been seeing a steady increase in their business with the Asia Pacific region, even as global sales drop, and the Chinese market as taken notice. As a result, they are shooting to cut out the western chocolate makers so they can capture the regional demand instead. As a result of all this activity, the prices of Chocolate have gone vertical, surging more than 250% last year. The result of all this is a historic deficit to the global cocoa market, as China lands huge direct purchasing contracts with the Ivory Coast.

Natural Resource supply regions are looking to move down the chain and capture the value-added production revenues for themselves instead of allowing them to be expropriated by western capital. China is poised to facilitate this transition with its unreal market size and a pure fire hose of dollars and Euro to lend. The trading surpluses between China and the EU rests somewhere around $1b euro a day. This is why China uses Euro and USD to fund BRI projects, the risk is far less than doing it in Yuan. One of the things they've been doing recently is drastically lowering their holdings of US Treasury bonds, and then dumping that money into Africa and South America on projects that allow China's domestic businesses make exclusive deals that secure them massive amounts of product that fully undercut the western markets.

The net result of all of this can be seen in China's FDI to North America, which is currently crashing through the floor. While on the other side of the coin, their FDI for the Middle East, Africa, and Asia rises, and it rises in the raw materials sectors. China is already one of the largest holders of some of the world's most valuable raw materials, and it knows it can leverage this position. They leverage this position to capture raw material supply chains for their own factories, while cutting off the supply within their borders to the US and EU. There is a currency devaluing effect that happens when a country operates a trade deficit with another country, and that country doesn't reciprocate with equivalent investment. With so much of Chinas efforts focused on reconfiguring the global supply chain, it is going to leave places like the US and EU out maneuvered. These moves have been happening for a very long time, and not any individual western nation has the capital or market to drive these kinds of changes the way China does. One of the lowest performing sectors for FDI in America is mining, which means that it will be even more difficult for America to try and play catch up. This, I think, is part of the reason why securing mineral rights in Ukraine is suddenly what the whole thing was about. Europe gets something like 80% of its rare earth minerals from China, and the US is decades away from being able to have viable mines to replace Chinas. Now, with this "deal" in Ukraine, the west can shore up some of these losses by turning Ukraine into a veritable mining colony.

Taking the Yuan international in the way that the US made the Dollar international comes with heavy contradictions. One of those contradictions is that, to operate as the "World's Bank" with your own national currency, is that it would require other nations to hold your currency, which in turn places liquidity obligations on the national currency. Often, the measures of combating inflation with a national currency is to attempt to implement deflationary measures, which ultimately undermine the buying power of the national currency. When the buying power of the world's liquidity reserve drops, it shakes confidence in the holders of the currency, and they will begin to pull out of holding, to seek stability elsewhere. This isn't just economic theory, this has happened several times in America's past.

And indeed, in 1971 there was a sudden exit from the dollar (ERP, 1974: 144). It was ‘the cumulation of successive and mutually reinforcing layers of evidence and analysis’. The most fundamental was the inability of the United States ‘to finance its entire set of external policy commitments – on mutual security, on trade, on development aid, on capital mobility – except through the steady issuance of liquid dollar obligations’ throughout the 1960s. This disequilibrium was now demanding recognition and was beginning to prevail over biases against the devaluing of the world’s only source of liquidity. A second view was that ‘the poor wage–price–productivity performance of the US economy between 1965 and 1969’ required corrective devaluation. Finally, there was ‘the belief that developments in the conduct of monetary policy here and abroad (and hence in relative short-term interest rates) would induce large outflows of short-term capital from the United States to Europe’ (ERP, 1972: 144–5).

Like its predecessor, the Nixon Administration also saw the second of the three problems – of solvency, productivity and credibility – as the key to resolving them all, though it pursued different policies to do so. However, it remained confined to macro-economic policy, and soon faced the essential conflict between using these policies to increase growth and imperial obligation. As long as the dollar’s gold value had to be maintained, expansive fiscal and monetary measures to remedy ‘[a] rate of expansion and a level of employment less favourable than policy had projected’ could not be taken for fear of stimulating ‘the still lively expectations of continuing or even accelerating inflation [which] would have speeded up the flight from the dollar’ (ERP, 1972: 22). This contradiction, rather than any breezy IFIH wager on private confidence holding up the unbacked dollar, led to the closing of the gold window on August 15, 1971. Only now would HST retrospectively recast the troubled decades reviewed in this chapter as an era of US hegemony and a stable dollar.

-- Geopolitical Economy, section 'Our currency, your problem'?

The collapse of the gold-backed system was a result of the incompatibility between the USA's domestic goals, and it's international goals. The same can be said about the 2008 Housing Market Crash, since the sub-prime mortgage racket was being used to prop up international liquidity, and it is why the crash of the US housing market had international ramifications. China, with its massive trade surpluses between the EU and the USA, has been able to leverage that capital inflow to secure supply chain access in Africa and the Global South without having to risk any of its domestic policies with the Yuan. In many ways, Chian's approach to world investment is that of a mirror to the way the west has operated. They have sheltered their domestic currency from the contradictions that lay within the world market, allowing them to manage their national economy in isolation, without impacting their investment capabilities in the global market.