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The US-China economic struggle is a tangled issue that involves both industrial and financial decoupling. The tariff saga initiated by the US in 2025 has caused not only a Chinese, but a global rethinking of buying and holding US debt. The old global model was that China would sell goods into the US and stockpile dollars, which they would then reinvest into US companies. However, the Chinese government is quickly moving away from increasing their USD debt, even actively selling off their accumulated Treasury paper. In addition even telling local Chinese companies to keep their money out of the US for various reasons, including fear of sanctions and as a lever to slow down US technological progress during a period where capital is hard to acquire.
China is squeezing US innovation companies financially, as US companies also invest in China, in companies like Alibaba and EV giants like Xpeng, Geely, and Neo. As China influences trade all over the world and their consumer market grows, their stock prices will increase, which is the desired result for US investors. However, China is now angered at the US for breaking this economic model, as the US has a $1.2 trillion trade deficit, which means China is selling more goods to the US than the US is selling to them.
Chinese companies are starting to bar US investors from participating in China’s growth. The world’s largest battery maker, CATL, is going to limit its China IPO listing for US investors, with the goal of making US funds open offshore accounts in Hong Kong, move funds away from Wall Street to China’s financial hub, and reduce the need and use for dollars. This move has real consequences, especially if more Chinese companies decide to decouple from Wall Street.
The CATL IPO was supposed to raise only $4 billion but estimates are putting the total proceeds at more than $5.3 billion at the end of the day. Investors are expected to rush to pour money into the biggest IPO of 2025, with many Western investors, as China planned, ditching Wall Street and opening up accounts in Hong Kong to get in on the action.
Scott Bessent, US Treasury Secretary has put the delisting of Chinese stocks on the negotiating table, the threat to cut away US capital from Chinese companies. However, this is likely to backfire, as the top 30 Chinese stocks listed in the US have a combined market value of nearly $900 billion.
With tariffs being confirmed, then reduced in an apparently confused approach by the White House. While a 10% baseline tariff is expected to be in place whatever develops for the foreseeable future,investors will have to compete and move capital away from New York to Hong Kong to invest in Chinese companies and their growth. This is very real, and not a virtual de-dollarization, and good long-term news for several sovereign currencies, and for gold once the political noise and indecision begin to fade away.
Further Reading
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