Deutsche Bank becomes first foreign yuan clearing bank in Europe | Hacker News Reader

Deutsche Bank becomes first foreign yuan clearing bank in Europe

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418 pointsMarkoff471 comments

The US wields incredible negotiating power and hegemony because the dollar is the world’s reserve currency. Like the British pound and the Dutch guilder before it, if that loses reserve currency status it will be harder to borrow on favorable terms, which would affect the entire US economy. This is a big step in that perhaps starting to happen over the next few decades.

I really hope this is one step into a more multipolar world, maybe without a single hegemon the world is easier to change for the better

Historically a more multipolar world has been a more violent and chaotic world, but maybe this time will be better.

Well I wouldn't say it's peaceful now, or has been in the past... Actually there's few years that the US wasn't at war.

Please, for the love of God, speak to someone who is actually from a war torn country and understand how privileged all of us have been to live in the west. Even the wars we have been part of in the middle east have been minor disruptions to the Pax Americana: we really don't feel the effect of the wars we are in.(another problem in of itself).

99% of us got to grow up without the fear of military violence, and go about our lives.

OP's point still stands?

They didn't say there were no wars, only that that are less deaths.

Not sure what the point of your comment is in this thread. The premise that is being discussed is volume of world wide war. Not war itself.

The entire Iran "war" will probably have less casualties than a single day of World War I.

which makes it peace?

Compared to the time of great powers before WW1 and during, this has been by far the most peaceful the globe has been for a very long time

The world /is/ peaceful right now... relatively that is.

Not to say there isn't war, but they're small wars with a million deaths being a big one.

More people died in Second World War[1] than in all wars since then combined. If not for the Russian Civil War and WW2, the same would probably true for the Great War.

War is terrible, but the fraction of people who died in wars the last 75 years is substantially smaller than the 75 years before that and I do think that is worth celebrating. I am not confident this will hold for the next 75 years

[1]: https://en.wikipedia.org/wiki/List_of_wars_by_death_toll

Now I know I'm the big bad military guy saying this, but just give it a chance.

Do you think that maybe the reluctance to engage in large wars over the last 75 years is a benefit of the nuclear deterrent rather than political ideologies, or world view narratives, or hegemons?

Just kind of noticing that the 75 year figure you put out there kind of dovetails nicely with the existence of the nuclear deterrent in multiple global arsenals.

Obviously, I believe in the nuclear deterrent. Just wondering if there are other people out there willing to admit that it has been the best tool in mankind's toolbox for obliging people to talk to each other rather than go to war.

As long as it works... and maybe one day it will no longer work and then at least we can point back to discussions such as these and say 'you were right, up to a point'.

The problem with weapons is that usually weapons end up being used. And with the US now no longer working against proliferation the risks are going up.

The monopolar world has been incredibly violent and chaotic for everyone else but the west.

We're mostly just way better at using nightmares to farm clicks.

This whole house of card is very modern, there was no such thing as "Reserve currency" not even the British pound, it was the most traded currency. but holding a currency's (debt) as a foreign reserve instead of gold is very recent phenomena, even central banks reserves or their function is also rather modern phenomena.

while Yuan usage in trade will reduce the US influence, the amount of assets held in dollar nominated investments is so so much bigger, and this will very slowly change if it will at all.

The pound did act that way to some extent, but only within the Sterling Area and only between 1931 to 1972.

Prior to that, people might have talked about the pound as if it were a reserve currency in the same way the USD is today but, as you say, actual foreign reserves were based on gold.

Very telling that even top economists are unable to imagine a world without a reserve currency when that is the state of nature (even in antiquity there were multiple currencies, not just gold)

The yuan will never become a reserve currency as long as China maintain tight currency controls around importing and exporting it. It's very difficult to (legally) send CNY out or China.

The euro is in a much better position to be adopted as an alternative, but its share of global reserves has been flat at around 20% for years.

https://data.imf.org/en/news/imf%20data%20brief%20march%2027

Exactly. It's always been posturing.

No, and I dont think China wants the Yuan to be the reserve currency. But this is a good step in allowing better currency trading/exchange. Which can make imports between the EU and China cheaper.

For a moment, after that EU will come up with a new regulation / taxation causing everything to become more expensive again.

Will? It's already happening, the EU is putting tariffs on China.

Does the world still require a reserve currency? Spreading risk across the Dollar, Yuan, and Euros seems more logical. While the hurdles and friction associated with foreign exchange (FX) and international transfers were significant when reserve currencies were crucial, they are not as big an issue today.

>> The yuan will never become a reserve currency as long as China maintain tight currency controls around importing and exporting it. It's very difficult to (legally) send CNY out or China.

Did you read the article? It seems that may be changing.

Neither the word "free" nor "float" is present in that article - so I'd say no the article does not discuss that.

China's goal is weakening the dollar, I don't think they are after reserved currency status.

In any case, moving from USD -> Yuan would pose the same risk as people may perceive with USD today.

Having a single currency controlled by one nation is too risky.

China doesn’t broadly want a weaker dollar, at least not against the yuan. Until very recently they actively worked to strengthen the dollar in the pair.

Chinese currency policy is broadly about controlling their domestic population not about foreign policy. Between keeping their domestic manufacturing industry going and keeping their more affluent populations power in check you’ll find most of the motivation for what they do on currency policy.

This move gives one less reason to allow a currency transaction and thus one less way for domestic manufacturers (and importantly their management) to get around those capital controls.

As European Chinese business increased that became more important and Duetche is dominant in fx, being able to handle effectively everything now means European businesses won’t complain either.

"weakening" and "strengthening" often confuses lay peeps really hard on this subject, as a plain source of confusion. "cheaper" and "more expensive" are frankly better words

It only avoids the confusion if you're specifying for whom it's getting cheaper or more expensive

> The euro is in a much better position to be adopted as an alternative, but its share of global reserves has been flat at around 20% for years.

The Euro is only 25 years old: it would be pure folly to make the "reserve currency" something that recent.

Then... One country of the eurozone already partially defaulted on its public debt (Greece, in 2015). And France is running an insane deficit: so bad that there are now talks of the International Monetary Fund taking control of France's public finances. France had to raise the yield on its debt to its highest level since nearly 20 years. France cannot reach the "only 5% of GDP" in yearly public deficit, on top of an already insane public debt: it is snowballing and the only outcomes are going to be miserable for the people (and for the EUR).

An economist, before the EUR began circulating, explained by which mechanisms the EUR would lead to Spain, Greece and then France default on their public debts. That economist explained how the EUR would lead to "too many secondary houses in Spain" and "too many public servants in France". When Greece did default on its debt, that economist said: "I was only wrong on the order on which these countries would default".

One would be crazy to make a reserve currency a currency that's a mix up of countries that have different productivity and different fiscal laws.

The EUR is one of the worst currency ever conceived and it could turn out to also be one of the shortest lived currency.

> That economist explained how the EUR would lead to "too many secondary houses in Spain" and "too many public servants in France".

The part relating to France is the usual small-state BS that has thoroughly corrupted modern "economics". France's problem more is its power generation, they rely on nuclear power, a lot of their fleet is noticeably aged and desperately needs replacement, but such replacement is incredibly expensive. On top of that, French military expenditure is ridiculous, they still dream of being an empire, maintain nuclear weapons and aircraft carriers, that make sharing vessels or aircraft with other European countries a pain - as evidenced by FCAS collapsing, the French wanted to use us Germans as paypigs for their pet project suited to carrier deployments.

Chinese nuclear power currently, and soon they will have Thorium Nuclear reactor power… China is pursuing all energy avenues. They are even building multiple Hydro electric dams on the Tibetan Plateau.

Amazing what you can do when you’re not policing all over the place of course it doesn’t hurt when other countries want to sub out work too.

https://www.neimagazine.com/news/china-refuels-thorium-react...

https://china-environment-news.net/2025/06/01/world-first-ch...

There is no serious talk on the IMF taking control of French public finances.

The spread between France OAT and German Bunds is less than 100bps.

The French annual budget deficit is lower than the projected US one.

So someone predicted Greece will default, because they had an abnormal amount of debt, and they did default (albeit in a controlled manner) after the 2008 crisis. And because of that you think Spain and Portugal will default?

No, and with absolute certainty not because of the second houses or public servants. That's armchair economy talk from someone that got one predictable thing right once.

Look at Michael Burry (the 2008 bubbly guy, whatever his name is). He keeps screaming "bubble" every once in a while, never got anything right again.

Let go.

Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. It's too much power that's too tempting to abuse. But they also learned from the collapse of Bretton Woods that even orchestrated agreements with built-in penalties just don't work, because countries can simply ignore them when beneficial.

So I think we're headed to a future where no currency will dominate. This is probably also why the dollar's decline doesn't have any clear successor filling the vacuum. If anything, countries are accumulating far larger stores of gold. I expect this is also why BRICS is having difficulty creating their own trading currency. No countries can, or should, trust other ones which complicates matters greatly.

This is exactly my take. Except I think there was never an interest by China to make the yuan the new global reserve currency but instead slow walk it back to a gold standard, and that's what has been happening since 2008.

If a single country's currency is the global reserve currency, all you're finding out is whose thumb you're under.

No country is accumulating more than token amounts of gold. There just isn't much physical gold available relative to the size of the world economy.

The amount of money in the world is also minuscule relative to the size of the world economy. Such is the nature of widescale financialization that the market capitalization of various financial assets greatly exceeds the amount of money in the world. When you think about it, it sometimes makes you wonder if people will look back at this time with some degree of bemusement. I mean it's easy to understand how, and even why, we ended up here. But it's still a nonsensical place to be nonetheless.

Your comment makes no sense. There's no need for a larger money supply. The current situation is sensible (at least to anyone who understands basic finance).

I'm not saying there's need for a larger monetary supply. I'm saying that the world economy's 'value' is heavily driven by financialization, which is increasingly disconnected from reality, even more so as governments have gradually descended to 'stock market = economy' which leads directly to Goodhart's Law, and will eventually culminate in a 'correction.'

So for instance yeah the US only has about 1PE (Peak Elon) of gold, but the entire global level of US reserves are only about 5PE!

So what. The amount of physical gold held by the USA (or any other country) is almost entirely irrelevant to the real economy. It's a pointless relic of the past. We could sell off all of our gold so that people could make jewelry out of it and nothing would change.

You misunderstood something: that 5 "PE" I'm speaking of isn't gold, but the entire global reserves of USD. That has a tremendous impact on the economy of the world and is arguably the sole source of the US' economic power. The financialization is 'worth' many times more than 5PE, but it has very little connection to the "real economy."

Foreign USD reserve holdings have very little to do with the US' economic power. Where are you coming up with this nonsense? Even if every other country sold off their USD reserves we would still the same assets, same population, same intellectual capital, same natural resources, same legal system, etc.

The value of currencies when unbacked by anything is solely a product of supply and demand. The USD being used as a standard for trade drives significant demand which helps to stabilize the value of the dollar, and also aids in things like our ability to export our inflation (as well as threaten other nations with sanctions/etc). However that demand itself is not inherent, and only maintained with significant effort - and having the USD as the standard for settlement of trade has been a major part of this game.

Even the gradual decline in the dollar dominance is causing significant issues with exporting inflation, amongst other things we used to be able to take for granted. It's also the reason that long-term interest rates on government debt are now hovering around 5%. As demand for the dollar declines, the interest the government needs to offer to make US debt enticing grows. When paired with deficit spending you get a vicious cycle: you need more money because you're getting drowned in debt, but you now pay more for that money which means you need even more money.

So for instance you know the US budget, right? Those thousands of pages Congress agrees to spend each year? Education, military, infrastructure, and all of those things we typically associate with government spending? That's only discretionary spending. Lots of other things, like interest on the debt, is considered mandatory and spent automatically. We're now reaching the point where interest payments will soon be costing us more than the entire discretionary budget. And that's in the current situation where the USD still has quite high demand. You just hand-waving away everything that sustains that demand would cause a catastrophic and rapid collapse in the US economy.

> Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency.

That's a misleading statement. First of all at the beginning of the 20th century the British pound was clearly the global currency - where a lot of the international commerce happened. Then towards the 1930s and later on the Dollar took over that role. But that role carried much less weight back then - globalization was still in its infancy and a "global reserve currency" as we understand it today simply didn't exist back then. Right now some Dutch pensioners money is invested in American, Canadian, Australian, German, etc. companies. And the parts for most consumer goods are coming from all over the world. Pre Bretton Woods basically none of this existed. This global financial system we speak of today is unprecedented and only exists since the late 70s - where most countries abandoned their currency controls (apart from the US and CH which never really had them).

I agree that speaking of a global reserve currency is putting the cart before the horse, but I think the meaning was also clear. It was obvious that the 'foundational' currency within Bretton Woods was going to give its creator something that could be easily weaponized against other countries. And so they sought to make it 'impossible' to do that, but ultimately did so in a naive way - 'Here's all this power - please honor these rules that will punish you if you abuse it.'

Britain’s downfall was World War I

- no currency will dominate....

There is excellent research in "currency diversity", start with Prof B. Lietaer

https://www.youtube.com/watch?v=T9EI2PrDpmw

The yuan doesn't need to become a reserve currency for it to impact the US dollar. 15%+ of global trade is Chinese import/export. China is the biggest buyer and seller to most countries.

The United States is currently doing most of the damage to itself China or the EU really don’t have to do anything. Americans are shooting themselves in the foot.

One piece of good news is what the Norwegians are continuing to do with the Norwegian sovereign fund thinking ahead… one country took the resources from the north sea, and came up with a plan the other across the north sea squandered everything.

https://tradersunion.com/news/editors-picks/show/2984751-nor... Norwegian sovereign fun post 184 billion dollar profit

what’s stopping China from dropping currency controls in a ab afternoon? It’s not like this is some force of nature.

It's like 6-7 CNY to USD right now. If that goes to 1 or 2 (if the CNY rises dramatically in price wrt the USD), then everything imported from China to the US explodes in price. Explosion in price, the imports reduce dramatically. So Chinese exports, which comprise like a quarter of their GDP, implode.

china won't want to drop the advantages of being able to have such tight control over the flow of yuan.

Maintaining control over capital flight from china, for example.

Isn’t currency flight out of the country similar to sending jobs out of the country?

You’re getting it confused China doesn’t have to do anything just sit back with a bag of popcorn and watch the United States put on a show.

He who has the strongest economy and make things surprise surprise. In time they become the currency of choice.

One consequence of the transition to renewable energy and electrified transport, is that oil imports will start to decline. And the dollar is of course the currency of choice for that.

The US economy and other countries that export fossil fuels will feel the impact over the next decade or so. The energy transition might go a lot quicker than people seem to expect. Currently about 20% of global car sales is electric. In some countries it's well over 50%. China of course being one of them. And they are making rapid progress with electrifying freight as well. This is already impacting their fossil fuel imports. They still import a lot.

One effect that I think people underestimate is that while it will take a long time for all the ICE vehicles to disappear, the new ones do most of the driving. So, new EVs have a relatively large impact on fuel consumption and imports pretty early on. E.g. Chinese diesel imports apparently already are being impacted by their rapid deployment of tens of thousands of electrical trucks. Soon hundreds of thousands. That's already a third of the market in China and will probably head for well over 50% in a few short years. The EU is not that far behind.

The ripple effect that's going to have on oil trading, refinery capacity, etc. is going to be substantial. Of course current geopolitics is speeding things up massively. LNG and oil scarcity is causing a lot of issues globally and countries are accelerating moves to reduce their dependence on that.

Demand destruction will collapse profits and accelerate the oil/dollar downfall. Saudi Arabia can profitably pump oil probably under $10/barrel. If demand drops, thats where oil should be.

China with [EVs|Solar|BESS|Turbines] will replace all of the fossil fuel countries (US, middle-east, Russia). This is probably the biggest transition in the history of mankind. This is energy production, storage and all the appliances that use electricity. After this, its incredibly hard for any other country to compete.

Saudi Arabia needs oil prices at ~$86.60/barrel to balance their budget, per Bloomberg. It is not the marginal cost to pump a barrel, but what a country needs to support their sticky spending from previously assured energy exports. Governments will collapse long before we approach low single digit oil prices on the global market.

The World Is Awash With Oil and Prices Are Poised to Keep Falling - https://www.bloomberg.com/graphics/2025-global-oil-supply-pr... | https://archive.today/hkhtI - December 18th, 2025 (Control -F "Crude Price Forecasts Are Below Levels Needed for Budgets")

> China with [EVs|Solar|BESS|Turbines] will replace all of the fossil fuel countries (US, middle-east, Russia). This is probably the biggest transition in the history of mankind. This is energy production, storage and all the appliances that use electricity. After this, its incredibly hard for any other country to compete.

Strongly agree. China is replacing petrostate economic demand with demand for their clean tech products, which keeps their deflationary economy afloat, provides them soft power, and will transition the yuan to a global reserve currency. Today countries by dollars to by petroleum ("petrodollar"); tomorrow, countries will want yuan to buy "manufacturing fiat," to trade with the world's factory (China is 1/3rd of global manufacturing capacity, as of this comment). Stocks of assets vs flows of energy.

Indeed. Electricity will be the only abstraction layer of energy, all end uses (transportation, cooking, heating, cooling, appliances) will switch to electricity.

Electricity can be generated from any source (dirty + clean), but the abstraction layer of electricity will allow the grid to continuously increase the clean fuels. It helps that the cleanest is also the cheapest. Solar panels are cheap as dirt. In 1975, a solar PV module cost $128.27 per watt. In 2026 it costs $0.1 - $0.2 per watt, a thousand times cheaper. In 1975, only satellites could afford solar. Today, its the cheapest source of energy.

China will be an electrostate. Are there any other electrostates? Maybe Bhutan, Costa Rica, but they are too small.

> China will be an electrostate. Are there any other electrostates? Maybe Bhutan, Costa Rica, but they are too small.

China for sure. The rest will come as they replace the last of coal and fossil gas with anything low carbon, solar, wind hydro, as well as the necessary battery storage and transmission for energy orchestration and agility. Like Norway is already at 100% of EV sales and other countries are still close to 0%, we're simply observing a global energy transition horse race. Exciting time to be on the timeline imho.

Ember Energy: Global Electricity Review 2026: Solar surge halts fossil generation rise as clean power meets all demand growth and renewables overtake coal - https://ember-energy.org/latest-insights/global-electricity-... - April 21st, 2026

The ‘profound’ global impact of China’s rise as an electrostate - https://www.ft.com/content/013e8a27-ade5-48ed-8f2e-ffbf70cc5... | https://archive.today/J0bew - October 10th, 2025

You are assuming that carbon negative countries are all electrostates. That's not true at all. Buthan and Panama which are carbon negative are very far from being electrostates. Costa Rica is not even carbon negative nor an electrostate. Carbon negative countries and Costa Rica due to their low GDP are very far behind on electrification.

Just look up the percentage of new car sales that are electric on each of those countries. It's around 5%. The reason? They cost 35,000 dollars at the low end even for a Chinese SUV whereas the average new car uses gasoline and costs 16,000 dollars for a Chinese SUV.

according to these countries' censuses, Cooking with electricity and drying clothes in a clothes dryer are rather rare too, around 10% or lower. although clothes dryers are more common in apartment buildings, apartments are only around 10% of all houses. Most people cook with small government subsidized 25 pound LPG tanks. Water heaters are used by 5% of the population because the water is actually desirable cold and not hot because the air is hot instead of cold and there is no winter.

They are carbon negative because their population is small enough to have most of the country still covered in virgin jungles and forests. They are big enough to offset the carbon emissions of their small populations. The ratio of forest to population works out to make the country carbon negative.

Also due to low GDP, they don't consume much energy and houses are small. For example most people don't run AC most the time unlike the US or don't have AC at all. Houses are usually 50 to 100 square meters. Electric service is 120 amps at 120 volts split phase. That's just 14 kilowatts. Running AC even for 8 hours a day can cost half the average monthly wage.

Everything is within walking distance and highly centralized in cities. Even suburbs are high density with almost no outdoor space.

But China is already in decline before reaching this ascendancy.

I think new models will result in new structures, not just a switch from the US to China.

China's population is declining while building and operating the largest fleet of manufacturing robotics in the world. The US population is not declining as quickly while having limited capability to do anything. A recent example is $500M of taxpayer dollars spent on a munition manufacturing facility that did not build a single munition.

The US has coasted just about as far as it can go on it's exorbitant privilege while failing to invest in the future.

TLDR China builds, and will continue to build long into the future, the US prospers (for now) from financialization but cannot build, nor has the will to attempt to.

China Makes AI-powered Robots Core of National Strategy: China´s 15th Five-Year Plan (2026-2030) marks pivot to innovation - https://ifr.org/ifr-press-releases/news/china-makes-ai-power...

> Frankfurt, May 05, 2026 — China has launched its 15th Five-Year Plan by placing robotics at the heart of its modern industrial system. The aim is to pivot its AI research towards physical applications with robots as main drivers for economic growth. This is a next step in the country´s strong automation development: China´s manufacturing industry already has an operational stock of around 2 million units — approximately 4.5 times more than the global no. 2, Japan. 54% of annual industrial robots installed worldwide were deployed in China. This is according to the World Robotics 2025 Report, presented by the International Federation of Robotics (IFR).

General Dynamics Failed to Build Artillery Shells for the Army - https://news.ycombinator.com/item?id=49281711 - August 2026

Wikipedia: Exorbitant privilege - https://en.wikipedia.org/wiki/Exorbitant_privilege

That sounds like a wish? China has 1.3 billion people in an area the size of 1/3 of the United States (basically the area from the Atlantic Ocean to the Mississippi river Florida to Maine). Imagine if the United States had 1.3 billion people just in that area with the rest of the country being the equivalent of the Tibetan Plateau). One could argue that you would need/want to have fewer people not more.

I am arguing that population is not a component of success criteria, but steady state manufacturing capacity is. China has it, the US doesn't, China continues to cultivate and prioritize it, the US doesn't. If I want to build something of high value at scale, am I going to do it in the US or China? The answer to that remains clear, I'm on the next flight to Shenzhen.

For example, China can build ~20M EVs a year, the US ~1-3M per year, as of this comment.

Ember Energy: China Cleantech Exports Data Explorer - https://ember-energy.org/data/china-cleantech-exports-data-e... (updated monthly)

> As the world’s largest manufacturer of clean technologies, data on China’s cleantech exports provide an important early insight into the pace and scale of the energy transition. In 2024, China produced around 80% of the world’s solar PV modules and battery cells, and 70% of electric vehicles.

A multipolar world where every pole is a decadent husk or a former (or not even former) great empire.

Yeah, sounds about right for this timeline.

Sure. What difference does it make if they're 1.2b or 800m? It's still huge by any metric. The current US administration is definitely clearly working in their favour. That's part of why Detusche Bank is a yuan clearing house now.

https://paulkrugman.substack.com/p/a-tale-of-thucydides

If you buy yuan just to turn around and spend them you aren't holding the yuan.

China is currently pursuing all types of energy/solutions. They are not stuck on any particular one, is that because they’re run by engineers instead of lawyers/MBA’s…

>Saudi Arabia needs oil prices at ~$86.60/barrel to balance their budget

They can always cut down on candles, they will be fine.

> China with [EVs|Solar|BESS|Turbines] will replace all of the fossil fuel countries (US, middle-east, Russia)

I dont agree with china having the same position as the FF exporters. Simply because with renewables, you export the means to produce energy rather than the energy itself. So in terms of monetary value, china will be selling alot less panels than the FF countries sell oil. And other countries can also manufactor renewables tech themselves, while with oil they couldnt materialize it under their feet

Basically i think the paradigm of the energy trade being cornered for politcal controll wont exost with renewables. Renewables are decentralized and so not controllable

ACtually no , even with the export of primary goods that go into the manufactue of renewables like solar the price differential still favours China. A recent example is the boom of local solar manufacture in India whil relies on solar modules imported from china.The assembled panes are still 2X the price of a similar fullly aseembled one from China. And not due too subsidies of labour - a lot of the value chain is highly automated and densely colocated diffrerent from other industrail setups where complimentary industries are geographically separeted which increase final costt by adding unreliable transport and delays into the mix. So at scale and with high volume will continue to be the dominated by China , wear and tear even with renewables will continue to favour the first mover as tech evolves over time.The solar modules/batteries of 10-15 years ago are not the same effficency as those of today.

China indeed makes very cheap solar panels, inverters and batteries, but that just means that they take up a smaller share of the cost of a complete installation, which also includes labor and additional hardware for the mounting system. So solar panels doubling in price won't double the cost of new solar capacity, let alone the cost of electricity from existing installations. That reduces the political leverage a lot compared to oil, where a supply disruption affects prices on fairly short time scales.

Yep exactly , also they are perfectly content to keep selling at the razor thin margins for commodities rather than attach political costs.Unless and only when their red lines are touch see Lithuania(hosting a Taiwan quasi consulate) and recently Panama(after rescinding the port concessions and confisicating the operations).

Im sure theirs still market dominance to be had. But it wont be at the level that the US has with oil. This isnt just market dominance, its complete economic dominance. The US can controll all money because oil is sold in dollars. That wont be true for solar panels, simply because a country couldnt afford to go a week without oil imports, but a country could go years without solar panel imports, given how existing panels will still work and new panels can be manufactored domestically if needed (even if they are expensive). You cant jist manufactor oil, you meed to buy it

China has shown the willingness to develop and use any source of energy. The same cannot be said for the United States.

China is now the world leading developer of Thorium Reactors.

Innovator's Dilemma for the US. Any alternatives to fossil fuels impact the big energy companies, who want to preserve their cash cows.

From one of the GP comments, it's about preserving the petrodollar and reserve currency status as a whole. That's a way wider scope than a few companies. P

Theyre holding on for dear life but its futile i think. Renewables will be the future and they wont have that political leverage attached. Geopolitics is about to become more equitable. Itll be interesting to see what that looks like. Idk if itll more or less peaceful. I'd bet less honestly

While the Trump administration is anti wind and solar the actual market has installed a lot of wind and solar in the US.

And china installed more solar last year than the US has in total.

Coal in China has many applications beyond simply burning it to produce electricity.

Coal 2025 report

"China consumes 30% more coal than the rest of the world put together. It also produces more coal than all other countries combined, and it is the world’s largest importer. This dominance by a single country makes global coal markets very dependent on developments in China, notably those related to economic growth, government policies, energy markets, weather conditions and dynamics in the Chinese domestic coal sector."

https://www.iea.org/reports/coal-2025/executive-summary

In terms of reducing oil consumption China is pursuing two strategies:

1. Electrification of transport

2. Producing synthetic gasoline/diesel/chemicals from coal.

"The sector last year turned 276 million tons of coal - equivalent to almost a year of European coal use - into chemicals, oil and gas, according to the China National Petroleum and Chemical Planning Institute."

https://www.reuters.com/sustainability/climate-energy/chines...

"China’s power sector is undergoing a visible transformation. Electricity demand rose by 5% between 2024 and 2025, reaching 10,368 TWh, yet coal-fired generation declined by 113 TWh to 6,294 TWh in a year, reducing its share in the power mix. The entire increment in electricity demand was absorbed by nuclear and renewable sources, whose combined output rose by 617 TWh. On paper, this reflects a decisive shift away from coal and toward low-carbon energy. In practice, however, coal is not disappearing from China’s industry – it is being redirected."

"Coal-to-liquids (CTL) and coal-to-chemicals (CTC) technologies provide the missing link. Using Fischer-Tropsch synthesis, coal can be converted into synthetic liquid fuels such as diesel, gasoline, and naphtha, as well as petrochemical feedstocks including olefins for plastics production. China and South Africa are the only countries operating CTL and CTC at an industrial scale. China alone consumes hundreds of millions of tonnes of coal annually (380 million tonnes as reported by the IEA) for chemical and synthetic fuel production. It is important to note that the largest part of this demand goes into the CTC industry. China has effectively replaced gas as its main feedstock for ammonia and methanol production with raw coal, to the extent that roughly 80% of these chemicals’ output is now fed by coal."

https://oilprice.com/Energy/Coal/Chinas-Renewable-Boom-Masks...

What this means is China can flatten the demand much faster as they have a way to create synthetic oil. They may continue to buy oil as long as prices are reasonable.

This reminds me of The Prize: The Epic Quest for Oil, Money, and Power Book by Daniel Yergin. Germany created synthetic oil but it was too expensive, resource-intensive, they couldn't make enough of it economically at the scale they needed. They had no choice but to go to war for fossil fuels which they don't have access to.

I wonder how the unit economics are working out for China.

I don't think that Germany had no choice, because Germany scaled synthetic oil production a lot during WWII:

"Being petroleum-poor but coal-rich, Germany used the process during World War II to produce ersatz (replacement) fuels. FT production accounted for an estimated 9% of German war production of fuels and 25% of the automobile fuel."

https://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_proces...

But you can get soft power by being humanitarian.

China delivers a second donation of 5,000 photovoltaic systems to Cuba: https://www.youtube.com/watch?v=qrvjyZ76Z5w

Panels cost nothing, the balance of system costs and labor will be borne by the recipient. People will remember for 25 years.

People will remember but they wont submit. The US got countries to submit to them becuase of the economic sanctions made possible by cornering the energy trade. I dont think we'll see that again given renewables becoming the meta

In yiur example, cuba will remember china's help, but china will have to keep being nice to keep that loyalty, which means conprimising with cuba rather that forcing it like the US could do

But, how much of the extracted oil becomes ICE fuel? Because other transports cannot be converted that quick (air, sea...) and most if not all petrochemical industries will still need to exist even if all cars drive electric. So how big will be the effect of crashing fuel demand?

25% of oil production is for cars

16% for trucks and buses

7% for aviation

4% for shipping

2% for rail and domestic waterways

25% + a chunk of the 16% (city buses, shorter distance or smaller trucks, etc) is a good amount.

https://www.statista.com/statistics/307194/top-oil-consuming...

You mean a good amount of the 46% consumed by road transports. So my napkin says, when we all switch to driving EV the oil demand will drop by 15%. It's something for sure, but not overly dramatic (to me).

Trucks and buses are starting to be electrified as well. Some boating as well but that‘s a rounding error.

Every 24 months of EV production in China destroys 1 million barrels a day of global oil demand, as of this comment, at current rates of EV production. We should expect these rates of production will continue to increase. Total annual light vehicle sales are ~90M units. Globally, over 1-in-5 (22%) of new cars sold were electric in 2024. This share was 92% in Norway, and in China, it was almost 50%. In 2025, it was 1-in-4 (25%). The world has 20-30M units/year of EV manufacturing capacity, as of this comment. Light vehicles and heavy vehicles are solved for with battery electric, I argue, based on all available data.

Aviation and petrochemical use cases are unlikely to disappear in our lifetimes, but that is a small slice of today's oil demand (lets call it ~15-20% for the sake of argument), and will be the remainder as renewables and batteries eat global energy demand. ~40% of marine shipping disappears when you're not moving energy around the world, the remaining half can burn renewable energy produced ammonia or methanol for fuel. Like bankruptcy, the change happens slowly, and then all of a sudden. China now has more power than OPEC because of the facts in this comment and their vast strategic petroleum reserves.

It is understandable to say "this flywheel is spinning slowly" before it is spinning very fast, while you're watching it spool.

How China became the world’s great oil power - https://news.ycombinator.com/item?id=49238158 - August 2026

Laos went 100% electric vehicles overnight with a drastic approach [Bans Fossil-Fuel Car Imports] - https://news.ycombinator.com/item?id=49040819 - July 2026

Electric Vehicle Sales Boom as Ethiopia Bans Fossil-Fuel Car Imports - https://news.ycombinator.com/item?id=47068567 - February 2026

Norway EV sales and related data - https://robbieandrew.github.io/EV/

Our World In Data: Tracking global data on electric vehicles - https://ourworldindata.org/electric-car-sales

Global oil price stuck in triple digits. Goldman Sachs says it may stay there for years - https://www.cnn.com/2026/03/20/energy/oil-gas-prices-intl-hn... - March 20th, 2026

Electric Cars Pass a Crucial Tipping Point in 23 Countries - https://www.bloomberg.com/news/articles/2023-08-28/electric-... | https://archive.today/e8XSt - August 27th, 2023

Almost 40% Of All Ship Cargoes Are Oil, Coal And Gas - https://thelastdriverlicenseholder.com/2022/01/12/almost-40-... - January 12th, 2022

https://unctad.org/system/files/official-document/rmt2019_en...

There's no reason to separate cars from trucks and buses. Everything is getting electrified. In jurisdictions where Buy America Act doesn't apply (i.e. the world outside the US), electric buses are already the default.

Moreover, it takes a lot of oil to refine and transport oil. If there's no demand for road transport, then the corresponding demand for refining and transport will disappear as well.

Finally, coal is already replacing oil in the chemical industry. Not because it's cleaner, but because it's cheaper and more available.

I separated cars and heavy vehicles because that's what the GP post asked about.

Copenhagen, where I live, has had a fully electric public bus fleet since 4 months ago when the last two bus lines were converted. The harbour ferries are also electric, and obviously the trains and metro. Garbage trucks and delivery trucks (e.g. delivering beer) are increasingly electric.

About 6% is for plastics. That isn't going away anytime soon, but it also doesn't release much carbon, it's mostly just changing form from liquid to solid.

I would add energy generation to ICE fuel. This is about 84-86% of total I believe

This, and it's murky because a good chunk of that used directly by ICE will move over to power generation to power EVs -- it's not as if we're anywhere close to 100% renewable power even just for EVs here.

There's a good EIA graph about halfway down on https://www.weforum.org/stories/climate-action/us-fossil-fue... that breaks it down.

For both transport and home heating you need to remember that the electricity is hugely more efficient in these roles. So not only is some of that electricity from a renewable source, you also need much much less electricity than you did liquid fuel in the first place because it was more efficient.

If the price were to drop all the way down to $10/barrel, demand would skyrocket.

The future where oil demand is so low and and will remain low even after low prices is much further ahead I'm afraid.

China is much more of a "fossil fuel country" than the US. They've got a ways to go to even catch up.

https://ourworldindata.org/grapher/energy-mix?tab=stacked-di...

87.5% vs 83.1%

Renewables have to go up by 10x (or more, with electrification of all the things) everywhere pretty much in the coming decades.

Uh, that chart shows they source a greater percentage of their power from renewables than we do with the exception of nuclear and biofuels. Their wind, solar and hydropower bars are all wider, and they're building more nuclear.

They just don't have our easy-access shale fields. If it wasn't for fracking our coal percentage would likely be just as high

I think you're not telling the full story with that chart. https://ourworldindata.org/grapher/energy-mix?tab=line&stack...

Thorium Reactors?

Look closely at China, they are pursuing all forms of energy Solar, Wind, Gas, Oil, Nuclear and even new Thorium reactors (Courtesy of Oak Ridge, Tennessee) and all forms of batteries Lithium/Sodium ion they are not resting on their laurels anywhere they are willing to use anything, and are open to any solution that works.

https://www.neimagazine.com/news/china-refuels-thorium-react...

https://china-environment-news.net/2025/06/01/world-first-ch...

The Chinese are not limiting themselves to just one solution or two they are pursuing all types of technology all types of energy they seem to have an open mind is this where/becuase the oligarchs don’t get to call the shots in their system?

China installed mora solar than the US has in 2025. They're currently building 35 or so new reactors, at paces nobody else can. This will change quickly.

This is actually not the first major energy transition.

The world moved from coal to oil for transport and shipping fairly quickly due to the higher energy density and significantly easier handling of liquid vs solid fuels. Using pipes and tubes was a huge labor savings compared to having people shovel coal into a hard to control boiler.

Automatic mechanical stokers replaced people with shovels long ago. Nobody has shoveled coal in a boiler room since the era of the Titanic. Oil is still easier to handle in ships (or really any transport) though.

Were these ever particularly common on steam ships? They were definitely a thing on trains, but I thought they more or less only showed up as the transition to oil fired boilers was getting going anyway.

Even with mechanical stokers you still needed a dedicated fireman making sure the proper amount of coal was making it in.

Nothing like a modern liquid fuel engine where you can just drive yourself without manually adjusting the amount of fuel burn by hand.

Saudi Arabia can profit at those prices, but it can't sustain its living standards at those prices unless they pump like crazy. I recall reading that it was around 40 bucks a barrel where things would start looking not ideal for the princes.

Oil and gas is more valuable for other uses besides burning it up into thin air. Humans have just been pretty sloppy any country that has plenty of oil and gas won’t go broke.

I had never considered the demand destruction effect of EVs on fuel like that. It makes sense though, because the biggest users will justify switching to electric faster because the payoff time is quicker.

What's good in electric cars? If a large power plant is destroyed how are you going to charge your electric car to escape?

You can have solar panels and batteries right at home. You can't have an oil rig at home.

What are you afraid of happening?

This is such a perverse and anxious fear imo

A reasonable scenario might be a cyberattack taking down large portions of the grid for a prolonged time. It's not impossible to achieve something like that, Stuxnet proved the concept of corrupting PLCs driving powerplants ages ago.

Alternatively, even outside a cyberwar scenario, bad weather has been shown to take down power grids for entire regions for days, sometimes weeks.

If they've taken down large portions of the grid for a prolonged period of time you're also not going to have much gasoline left.

> bad weather has been shown to take down power grids for entire regions for days, sometimes weeks

Once again, as someone who actually lived through those scenarios multiple times, when the gas pumps go down you're usually shit outta luck on getting gas.

When the grid goes down for days, the gas you have in your gas car + any random fuel tanks you have in your garage is what you have. Don't expect anything else unless you plan to take it at gunpoint.

Meanwhile the oil supply system is immune to outside threats

https://en.wikipedia.org/wiki/Colonial_Pipeline_ransomware_a...

https://shippingtelegraph.com/shipping-news/adnoc-reports-15...

https://news.un.org/en/story/2026/08/1168121

If you're talking about "outside threats to oil supply" then this has to be a major and current example:

https://en.wikipedia.org/wiki/2025%E2%80%932026_Russian_fuel...

We can find many examples of "Russian oil refinery damaged by Ukrainian drone strike" e.g. today https://www.kyivpost.com/post/82326

> repairs potentially taking up to six months. The strike adds to Kyiv’s escalating campaign against Russia’s oil industry and a growing fuel crunch across the country.

But search again tomorrow and there will be new examples. Refineries and other oil infrastructure are large, located in well-known fixed locations and are highly flammable. This campaign demonstrates what a weak spot they are for a petrostate.

> bad weather has been shown to take down power grids for entire regions for days, sometimes weeks

Where I live, we have typhoons which depending on the direction they arrive in can result in all the gas stations being out of gas for 2+ days. Meanwhile the grid keeps on ticking.

Are u serious? If ur oil refinery is destroyed how are you going to pump oil to your house?

You can buy it on a black market unlike electricity.

Yes, buy crude on the black market and build your own refinery. Or you can run your own DIY fracking rig in your backyard. There must be some yt videos.

Are you suggesting we plan our global energy infrastructure based on attributes like "how well it fares in a post-apocalyptic barter economy"?

Are you thinking that there are no wars and power plants do not get destroyed? If you live in a non-nuclear country the chances are non-zero and it is not smart to depend on large, centralized, easy to destroy power plants. It actually dumb to build those large plants instead of decentralized smaller plants.

For example, a president of a certain country threatened to make a "power plant day" in another certain country.

Why are power plants considered centralised but the extraction, transport and refining of oil isn't?

With the renewable power revolution, do you think solar panels and batteries are going to be more or less centralised than oil extraction, transport and refining?

Are you familiar with how easy it is to repair the electrical grid after damage, compared to what happens to oil wells whose operations are stopped?

> Are you thinking that there are no wars and power plants do not get destroyed?

OK, but is the argument that oil refineries don't get the same treatment in war? They're also "large, centralized, easy to destroy". In fact highly flammable. It has been happening, not theoretically but actually.

> If a large power plant is destroyed how are you going to charge your electric car to escape?

Solar panels and home battery storage. This is also going to seriously screw over electrical grid and especially powerplant operators... residential will, at least in suburban and rural areas, not need a grid any more except during prolonged phases of low solar yield.

I hope its strictly an American fantasy to think you're driving out of anywhere when something like that happens.

Buy a bicycle.

I know I have a problem with "suspension of disbelief" but I find it always weird in those dystopian movies where they all drive monster trucks on an apparently endless supply of scavenged fuel and spare parts. But I'm positive exactly this Hollywood spirit is what fuels (pun intended) most of those hyper-optimistic answers.

I love disaster movies and they ocassionally lean into the idea of traffic being kind of bad in the event of a disaster. Deep Impact had a protagonist escaping biblical level tsunamis on a dirt bike.

https://tvtropes.org/pmwiki/pmwiki.php/Main/NoBikesInTheApoc...

In Phoenix we all live in the shadow of the Palo Verde nuclear generation plant. And once on the radio I heard some pundits discussing contingencies if PV should glitch out and have a life-threatening disaster. And they matter-of-factly said, "you're gonna be walking." And that would be the truth; in a full-scale evacuation of a city like Phoenix, the freeways are not built to accommodate traffic like that, and yours truly has no car anyway, so I would be packing light and walking in the opposite direction, and/or ignoring the orders, to meet whatever fate awaits.

But I bet there would be a lot of bicycle and vehicle theft going on, in such an event.

Following Hurricane Sandy, many were left without power and ultimately even gas was strictly rationed. So it's not out of the ordinary to imagine an event like that happening.

https://www.nj.com/news/2012/11/sandy_gas_ration_12_counties...

This is a good point, Florida EV drivers have already found that EVs are more resilient in a natural disaster because the grid infrastructure supporting the fast chargers comes back online much faster than service is restored to gas stations.

EVs that have Vehicle-to-Load (V2L) capability are also useful in a natural disaster: You can use the EV as a big battery on wheels to power some electrical appliances - e.g. keep a fridge going or a light on, until the grid is back.

This is a good point for sure. I can run my house for most of a week off my Lightning. I wish my Model 3 had the same ability, maybe some day this will be a standard option on all EVs. It's such an obvious use case for a huge battery on wheels.

Strictly an American fantasy, that you're left on your own in the face of any kind of disaster.

AFAICT americans are left on their own in the face of any kind of disaster. But, to be fair, in Europe we don't (yet) have the kinds of disasters that they have, so I can't say if europeans are left on their own or not.

Oh yea, that's what I meant, sorry for not being clear.

And we do have all kinds of disasters, but the state not only effectively intervenes, but also supports the aftermath and reconstruction. In America there are some crazy examples of towns just being left straight out abandoned afterwards, because tehre's no such thing as government reconstruction support.

There is no need of large powerplants. Thats the legacy grid, only to make Warren Buffet rich. New grid (that needs to be built) will have solar panels, BESS + EVs for storage, either off-grid or a small community grid. The new grid is distributed and indestructible.

It’s always charged. You plug it in when you get home and it’s ready to go when you leave.

How are you gonna use the electric gas pump in that scenario? The electric car guy just needs a few solar panels.

What's good in Gasoline cars? If a refinery is destroyed how are you going to fuel your gasoline car to escape? It's not like you can charge it from a standard wall outlet or rooftop solar like a regular EV.

* Ask the people in Crimea how they are dealing with this exact scenario.

* Petroleum refineries are large, fixed, and highly flammable by nature.

> In some countries it's well over 50%. China of course being one of them

As always with these stats, I like to check whether that includes plug in hybrids, and it does. Those are still mostly dependent on fossil fuels, although they use less. Pure BEV adoption seems to depend on your radius from Norway: https://www.autonergy.co/blog/global-ev-adoption-leaderboard...

(France should really be doing better, after all migration away from fossil fuels was a motive behind the Pompidou/Messmer nuclear buildout in the 70s!)

Wow. On mobile Firefox I have to use two fingers to scroll that site.

Yeah, that's some cursed JavaScript :-/

Thats personal vehicles. But if China is going full speed with electric trucks, that will be the fastest gamechanger. Diesel trucks run 300K miles, under 5mpg, consume a gazillion gallons. Electric truck fuel costs are probably 10%.

Its really sad that India is pro fossil fuel, it has an opportunity to follow China's strategy.

I don’t know what you mean by India is pro fossil fuel. It’s aggressively building out solar and has multiple nuclear reactors being simultaneously constructed. It would love to be an electrostate but is doing everything it can to satisfy its populations energy needs in the meantime which means they can’t just stop using coal and oil.

You will find Chinese electric trucks making inroads (heh) everywhere from UK and Europe (1) to Africa (2)

now that it's a proven business model in the centre of the these things, of course.

1) https://octopus.energy/big-on-batteries-octopus-and-catl-tea...

2) https://mybroadband.co.za/news/motoring/648661-electric-truc...

India is pro-coal (has local sources), but anti-oil (import dependence). It is only pro-coal because there's no other alternatives at cost/scale for baseload generation.

India is literally following China's "anything but oil and gas", which encourages renewables, nuclear and coal.

In fact, the Chinese coal lobby is partially responsible for the push for electric trucks. The alternatives are diesel and LNG - both competitors to coal.

Those numbers are from before Mr Trump decided to do his very best to convince the world to stop using oil. Which happened to coincide beautifully with VW group, Stellantis and Chinese firms having an all out price war on smaller EVs, which have until now been the underserved segment of the market. In Denmark it’s certainly not 36%, its probably closer to 90% of new cars being EVs, it’s simply financial suicide to buy a new ICE car here.

> it’s simply financial suicide to buy a new ICE car here

That's a result of tax policy much more than the fundamental economics of ICE vs EV. Petrol is highly taxed. ICE cars are highly taxed. EV cars are probably exempted, or at least taxed less.

Sure, but the fundamentals are moving in same direction, partly thanks to Trump. Electricity is getting cheaper and EVs have 90+ efficiency, gas is getting more expensive. You could also say that petrol is fundamentally way to cheap because so far it has been exempt from paying for all the damage it causes.

> Those are still mostly dependent on fossil fuels, although they use less.

I don't think the word "mostly" belongs in that sentence - "partially" might work.

It depends significantly on how far you drive - I know 4 people with Plug-in hybrids. They all use ~0 fossil fuels most of the time, and only have to fill their gas tank when they go on a longer driving trip (roughly every 4-6 weeks or whatever). Considering how fuel inefficient city driving is, it's enough to eliminate at least half, maybe 2/3 of their fuel consumption.

All those EVs but demand is higher than ever.

https://www.statista.com/statistics/271823/global-crude-oil-...

I'll be surprised if renewables overtakes oil for energy production anytime soon. I could see nuclear doing that, but I never can get past the challenges of maintenance and replacement costs for solar panels, turbines, and especially for storage.

I will be very happy to be proven wrong here over time though. New battery technology could make a big improvement. And I keep hearing that AI will give us answers to all our technical challenges and lead to an age of abundance where we all make a high income, so there's that too.

Are we using that much oil for energy? The leading non renewable power source now is natural gas or similar, which I didn't think interacted much with the oil market. So even without nuclear, if the future is natural gas pipelines for baseload oil would still be mostly a manufacturing and vehicle fuel deal.

My understanding is that the shift towards natural gas is largely because it is a very cheap byproduct of fracking (for oil). It happens to be "greener" when burned so gets green-washed also.

I wonder what would happen if oil demand was significantly reduced, thus reducing fracking.

Ah yes, nuclear is known for having cheap replacement costs, especially Fukushima was known for being particularly cheap.

Solar power is the worst, it gets more expensive every year.

Regarding batteries... It's over for sodium based batteries (the ones promising us cheap battery storage) because dry coated Lithium ion batteries are coming onto the market which means sodium batteries are an economic dead end.

Until we get dry coated sodium ion batteries of course. Not sure it's over.

> but I never can get past the challenges of maintenance and replacement costs for solar panels

Maintenance? Compared to fossil fuels that require a complex global supply chain just to burn the damn thing you spent so much effort digging up? And large, complex power plants with a large number of moving pieces and complex machinery? Which also require big water supplies?

Solar is the most modular, easy to install, scalable, and cheapest energy source on the planet. And dare I say most reliable, because it practically doesn’t need any major scheduled or non-scheduled maintenance over several decades, other than cleaning it like a window. And get this, once it’s installed, what are the operating costs? They just sit there, on land (which could be taken from ethanol production), any give you free electricity for 30+ years.

Other power sources seem and overly complex in comparison, and it especially seems crazy to use anything that relies on finding, digging up, shipping, and then burning fuel, when such an alternative exists.

Current battery technology is very solid, increasingly cheaper (solar+battery already cheaper than most others), and only getting better.

I did a lazy ask google, and it thinks less than 3% of crude oil is used for energy. The vast bulk of oil being used: 'transportation (gasoline, diesel, jet fuel), heavy machinery, and non-energy uses like asphalt and plastics rather than power plants'.

That is of course, one of the big problems of 'going green' - electricity production is low hanging fruit and understood by the general public.

When that's 'solved' (solar, wind, geo, nuclear), how do we solve the other 97%?

Oil really isn't going anywhere. It will be a slow tail, perhaps too slow to stop emissions.

https://www.iea.org/world/oil

We knew how to make synthetic hydrocarbon one hundred years ago. Nazi Germany used the Fischer Tropsch process to make synthetic fuel after the Royal Navy blockaded their oil import. The only reason we're still digging up fossil fuel is because it's cheap. According to some calculation, green hydrocarbon from atmospheric CO2 and electrolytic hydrogen could be commercially viable when fossil petroleum reaches $200/barrel , which is really not that far off.

Around 50% is used for road transport, though, which is poised to be replaced and was one of the parent poster's main points.

https://ember-energy.org/data/china-cleantech-exports-data-e...

Meanwhile everyone is being confused with AI-slop.

EVs don’t need renewables. What makes them attractive despite the bad marketing in the West is that they can be powered by anything that can create electricity, like coal; which is something China has a lot of

The transition to EVs is key to the national security of many countries that currently do not have energy security like China and even most if not all member countries in the EU.

China doesn't have a lot of coal, at least not relevant to their energy requirements. They still have to import a huge amount and remain vulnerable from an energy security perspective.

https://www.iea.org/countries/china/coal

>"remain vulnerable from an energy security perspective" - not while having Russia close by.

Russia is a big place with limited internal transportation. Land routes from Russia can only supply a fraction of China's fossil fuel import requirements. Much of it still has to come via vulnerable merchant ships. China still lacks the capability to protect their sea lines of communication, although that might change in a few years.

The other thing to keep in mind is the Chinese, quite reasonably, don't have a lot of faith that the Russian government they make deals with and invest in now will be the same one honouring those deals and investments next decade. Russia has a lot of risk, a lot of problems and not a lot of cash.

There's a lot of rosy or false assumptions here.

For example, if every road vehicle became an EV tomorrow, global oil demand would drop from 100M barrels per day ("Mbpd") to... ~60M. And that assumes EV replacements for things we don't have EV replacements for yet, like long haul trucking. We also have avgas, for which there's no replacement, and global shipping.

But beyond fuel there's a significant range of non-fuel usages (eg industrial, plastics, construction).

There's another factor here too and that is that the oil economy props up the weapons economy. Nobody goes to war over a solar panel [1]. That sounds like a good thing (and it is) but you have to realize there are forces who like that oil drives war became war is a huge profit opportunity.

[1]: https://www.theenergymix.com/no-one-goes-to-war-over-a-solar...

> One consequence of the transition to renewable energy and electrified transport, is that oil imports will start to decline

Unless Jevons Paradox. Cheaper energy might mean more oil use. 1) Never underestimate the world's hunger for energy; renewables and electrification have huge disadvantages (you can't get close to the energy density of gas/diesel). 2) Oil is used for most products. 3) Even if its use declined, that would raise the price without making it less important.

I think what's missing here is the second order effects. refiners will adjust their crack, use blending etc but that's just a rounding error. you're still going to have demand for the other ~60% of the barrel, so refiners are going to have ~40% of the barrel to find a market for, EV's are going to look a lot less appealing when gallon of gas is <$1 (or ~$8 an mmbtu), and when its that price, people will find all sorts of uses for it (that's like ~1/2 the price of europe/parts of asia), all of a sudden people are going to be burning gasoline for power etc.

it'll be a roller coaster for sure, but i think there are going to a lot of interesting substations and knock on effects.

A lot of especially the US market needs high oil prices to justify production cost. Some refiners might actually reduce capacity rather than sell below cost levels or at lower margins.

The reality is probably going to be lots of price uncertainty (even more than today) and increasingly flaky supply chains as refiners and oil producers gradually reduce capacity to keep prices high enough to stay in business. As that happens, investments in refineries become more risky as well. Because if you can't rely on lucrative fuel sales anymore, that's a big problem for long term viability of a refinery.

Before cars started burning petrol at scale, refiners were occasionally dumping fuel in rivers. It was just a worthless by product. All the money was in things like kerosene.

>> They still import a lot

I don't think it's common knowledge how much they dropped imports since the Iran / straight of hormuz crisis.

Back at the start of that conflict there were a lot of breathless takes about what catastrophe was in store in a few weeks time, and what materialised was bad but not in anything like the same league as what was predicted.

The thing that wasn't accounted for in the analysis at the time was just how rapidly and by how much China could suppress its appetite for oil imports.

They had basically been planning for this shortfall for ever as a likely outcome of sanctions/blockades during an invasion of Taiwan.

Curtailing imports so much is a smart soft power move in not only does it ingratiate countries that would suffer most from the price spike but it could soften the resolve of Taiwan in showing that one of the largest penalties that would result from the invasion isn't nearly as punishing which in turn makes Taiwan's porcupine strategy less viable.

Along with US own goals like the thoroughly bungled and unplanned invasion, tariffs, corruption (both business crimes and more moral crimes like pedophilia or disregard for following legal process) it's made most of the west rate China above USA in favourability [latest Pew research poll].

ICE use will drop slowly, and then all at once. Because gas stations will go out of business and it'll get harder and harder to refuel them.

People will keep burning oil as long as it makes economic sense to do so.

I think this has the causality reversed. The dollar is the world's reserve currency because the US wields incredible negotiating power and has been the de facto military hegemony in the past few decades.

It seems likely that the dominance the US has enjoyed in the recent past will diminish somewhat as other blocks with larger population bases catch up on the technology and industrialization fronts, and eventually start flexing their industrial might to create peer-level militaries.

US Military has been a paper tiger in reality for quite some time. The problem is that Trump decided to demonstrate this in practice.

It is becoming obvious for gulf countries that US military protection is worth nothing.

The US military may be ossifying into a paper tiger, but I'd say Iran mainly shows Trump is a coward and an idiot.

From what I hear, what Trump did with Iran was burn through the US stockpile of certain fancy special-purpose wepons you're really only meant to use to punch a hole for your conventional forces to enter by. Trump is not willing to send in those conventional forces, because many of those personel will die. Trump may not care about the lives of the US personel per se, but with the mid-terms coming up he will care about the impact of those deaths on the election result.

Also: Gulf Wars I and II had a lot of build-up and prep, moving forces into the area; this was diving straight in because someone (my Israeli namesake) flattered Trump's ego.

Now I also think it's not even controversial to say that drone warfare is radically changing the nature of engagements. I don't believe the US could take on present-day Iran, owing to Iran's production of militarily relevant quantities of cheap and good-enough drones; a saturation attack can drain the defensive capabilities of warships, and while the exact performance is classified, a slow upgrade cycle would probably allow a saturation attack to overwhelm the *sensor* capabilities from not too long ago.

Laser defence systems may change that, but those aren't all-weather solutions, and the sea is the exact worse case for this. And I don't know if anyone's thinking about saturation attacks with submersible drones.

We could take on Iran with Russia, China, Pakistan, Afghanistan, and all the other Stan’s being the supply lines some what similar to Vietnam with six additional countries added, with the Iranians who appear to have the willingness to fight to the end.

How does it work long-term for the USA? In time the United States would have to build up to half a million men on the ground. The United States at its peak in Vietnam for example had over half a million men on the ground.

The biggest reason the Ukrainians are holding their own first and foremost is they are willing to fight, second is the supply lines. Vietnam won because they were willing to fight and they had China and Russia as their supply lines.

Afghanistan against the Russians, and Afghanistan against America was the same. The Afghans were willing to fight as long as they had material coming in from the USA and the same was true when they were getting all their supplies from the Chinese, Pakistan, when they were fighting us.

Supplies are important, but what’s more important is whether or not a group of people have the heart to fight to the end no matter what.

I would, like you, draw comparisons with Vietnam.

I think this means that the US is going to get stuck there for a very, very long time, as there are downsides to all options including pulling out, which may in turn survive a change of president.

On the other hand, all it takes is a president who doesn't care about the downsides, or thinks the downsides are worth the cost, and suddenly Iran's free to toll the strait, and a whole bunch of other straits get tolled in turn. If Iran gets away with it, I wouldn't be surprised if Israel finds Gibraltar closed to their shipping, though Suez would likely remain open to them for the foreseeable future.

I very much hope that Trump doesn't take the literally nuclear option here. A different Pandora's box to letting Iran take their toll, and a much worse one for everyone.

> I think this has the causality reversed.

Originally, yes. The US dollar did become a reserve currency because because of the circumstantially huge negotiating power of the USofA, however, as it stands now, the negotiating power is dependent on the dollar being reserve currency. The US is running on a consistent trade deficit, which is supported by the dollars covering economic growth outside of US.

When self-supporting systems are thrown off-balance, the sign in the feedback loop tends to reverse.

The US is the reserve currency because of Bretton Woods. [1] Under the Bretton Woods agreements participating countries were to peg their currency to the dollar and the dollar, in turn, would be directly convertible to gold. The idea was to make it impossible for countries to artificially manipulate the value of their currency, and thus ease international trade standards.

The US' barrier to exploitation was on the gold clause. If we printed too many dollars, then other countries could do a gold call with the increasingly worthless dollars, get valuable gold in exchange, take the currency out of play, and the issue would be fixed. So punishment and self interest in a quite well designed system, kind of. The problem is we just printed a bunch of money anyhow and then when France decided to make a gold call with their reserves, we shrugged, defaulted, and just broke the agreement.

So this started the modern economic era in 1971 where currencies became completely detached and free floating. At that point about 85% of global reserves were USD. Countries began rapidly dumping the dollar and USD inflation began skyrocketing. In 1980 inflation in the US was at 13.5%! This era continued til around around 1990 with the USD falling to 47% of reserves, but then in 1991 the USSR collapsed leaving the US not only as the sole 'king' of the world, but also to former Soviet nations dollarizing once the dust had settled. This continued up til 2001 (USD at 72%) when there was both the dotcom bubble and the clear rise of China and Russia as global powers. We've now been on a steady decline since, with the USD currently down to about 56% of reserves.

[1] - https://en.wikipedia.org/wiki/Bretton_Woods_system

Losing the reserve currency doesn't happen in a vacuum. It happened to the British and Dutch because their empires were dismantled.

So, yeah, it could happen to the US, slowly, over time (it already is). But nobody wakes up tomorrow and says they no longer want USD. Where are you parking the money, yuan?

Deutche Bank I imagine is doing this because a significant fraction of their customers literally want to park their money in yuan?

If it was some rounding error they wouldn’t have bothered spending money to set it up and get all the clearances.

It seems worth mentioning that this allows DB to allow Yuan transactions to happen, bypassing any US sanctions. Since DB is not doing this without agreement from the German government and the ECB, this can be taken as an indication that they intend to do business with China the US does not approve of. At least, they want the option.

(and yes, it does not mean that the US is entirely without options to hinder China trade, just makes things harder. In this case, a lot harder)

> this can be taken as an indication that they intend to do business with China the US does not approve of. At least, they want the option.

Indeed, it also acts as a counter balance/hedge against the US's demands in the future.

The problem for Europe is simply that we need to trade with both sides fairly openly or our entire economic model collapses - We are massively dependent on US technology and Chinese industrial capacity - too dependent frankly.

That's the ideal model. Nations should be able to trade everyone without being under threat.

> nobody wakes up tomorrow and says they no longer want USD

Depends what happens tomorrow

This is why people, organizations, and nations really should be holding multiple currencies.

Holding only Yuan isn't necessarily going to save you from what's coming.

I completely understand the growing need to reduce the US dollar dependency. But these drawdowns should happen in an orderly fashion, with due consideration to addressing issues inherent in the old global financial order.

Clearly, in hindsight, being completely dependent on a single currency was one of those issues. It would be folly to replicate that environment with a different currency.

I'm less familiar with Dutch history - but that happened to the British Empire because its situation went from being the world's obvious #1, to barely avoiding national bankruptcy, due to the staggering costs of WWI and WWII.

The bailout, July '46 - https://en.wikipedia.org/wiki/Anglo-American_loan

Loss of India (the empire's real money tree), August '47 - https://en.wikipedia.org/wiki/Partition_of_India

FWIW, "dismantled" generally implies a personal outside actor, with the intention and power to take things apart. Vs. the British Empire crumbled mostly because Britain's & Europe's relative power / prestige / image, post-WWII, were just smouldering ashes of what they'd been before WWI. That had obvious feedback loops with ambitious "native" leaders, nationalistic memes, and the just-won "moral crusade" to liberate Europe from evil Fascist occupation.

EDIT: The post-WWII revelations & condemnations of Nazi atrocities, plus how well the "yellow" Japanese had done against European/"white" powers, were pretty much fatal to (then prevalent) meme of white people enjoying "natural" moral and military superiority over non-whites. Which meme was an important foundation stone of most of the Empires which crumbled in the decades after WWII.

It seems that people forecasting the collapse of the dollar are mostly doing it from a social perspective i.e. "America is collapsing under the weight of private healthcare, anti-immigration, tariffs, and the erosion of our allies; the dollar is done for"

But the reality is that financial markets don't really have a soul, and just care about economics. By all accounts, the American economy is doing excellent right now and dollars are still in heavy demand.

Its international strength is collapsing due to weight of Iran war, being untrustworthy partner, rupture from allies who supported it before and China going up. That means countries doing different long term strategic decisions, because they have no other reasonable choice.

Overall and overtime, that will weaken demand for dollar and what kind of trades other countries are willing to enter.

But what holds the USD as the reserve currency any more besides network effect inertia? It used to be the most stable country and one of the most prosperous. Both no longer true.

The current admin has destroyed much of the government backing. Its to he seen if the global business fail to uphold its value.

As other people on this thread will point out the Yuan is not close to replacing the dollar, nor is any other aspect of the Chinese financial system highly competitive, even with the staggering rise of corruption in the US.

But this is yet another indicator of the loss of soft power, which is much farther gone than, I'd say, 90% of Americans realize.

The supposedly smart people in the tech industry should be alarmed by the loss of soft power. A lot of tech revenue comes from overseas, but if US technology is seen to be the tool of an unreliable, belligerent, corrupt, authoritarian government, that revenue will evaporate, and it will happen faster than, for example, fundamental international finance changes. And yet these supposedly smart people have lined up behind our government.

It's a variation of the maxim "Don't make the customer think", what you want them to do should be the default action and you want them to do without thinking.

For some people in Europe now, they think about whether the thing they are buying/subscribing to is in the US or owned by a US company in a way that simply didn't happen in the recent past.

And all foreign transactions were done with a USD intermediary until the USA started making countries and banks question whether that was a good idea.

And its going to be incredible to watch how many of our own country will be gleefully cheering this on as if the replacement will be better for them.

How come Deutsche Bank, a German bank, is the first bank doing this? And why now? Is it because the less friendly political stance towards Europe from the US side that the tables have turned a bit?

I also wonder how much political backing a bank needs to offer a service with the implications towards the status of an allied currency as reserve currency status - small as it may be for now.

USD exorbitant privilege is mostly just exorbitant now that sanction evasion solved problem due to US going ham. Central banks pulling out of treasuries, rates increase selling to institutional vs marginal buyers, USD just terminal debt serving sink hole now. Ironically PRC can now lend out USD from their reserves and trade surplus at better rates than FED... the answer to USD in meantime for PRC is PRC USD, every dollar PRC recycles their USD is a dollar not buying treasuries that makes USD reserve more onerous to maintain.

LBH PRC not dumb enough to dig itself into Triffin deindustrialization hole US has. IMO Yuan positioning itself to be better than a reserve currency, it'll be premium currency for PRC tech stack (everything do be primogem) once PRC overtake west in critical strategic goods - ultimately, whoever controls discounted society sustaining tech / commodities stack long term controls payment preference. In meantime, PRC more than fine USD continue it's decline into debt serviced casino where somehow now house net loses until US inevitably have to debase/inflate away leaving others holding bag. There's really no alternative scenario (i.e. default) for USD at this point. Downstream of that is FX re reevaluations etc, i.e. PRC nominal > US nominal is not going to take years, is not dependant on PRC vs US growth, in the end it will take a few months of FX swing outside of either party's controls.

how could yuan be a reserve currency when its not even legal for its citizens to move it out of the country beyond $50k a year. they have extreme currency controls

Most central banks in the world hold their USD reserve in the Federal Reserve. There's no need at all for a the currency to be exportable, for it to function as a reserve currency.

Do you actually believe that the Central Bank of India is hauling Benjamins in wheelbarrow through the Delhi international?

it wields power with missiles, with the dollar as a consequence

The US is also has very large investment markets that are attractive to investors worldwide. Countries that export to the US can build up large US investments, and not just bonds either. (Flip side of trade deficit.)

It seems hard to say when that would change.

That horse has already bolted and bought a whole new stable with blackjack and hookers in a foreign country.

The US is in for a hard couple decades ahead given they aren't leading innovation, manufacturing, finance, geopolitics, and even their military power is now in question.

At least they owned the libs.

Being the reserve currency means the rest of the world accumulates your liabilities as their savings, i.e. it means you are the world's largest debtor, and the world's largest net importer. That is how the rest of the world accumulates your currency - because they sell more to you than they buy from you, allowing them to accumulate your fiat.

So this "reserve currency" status is a great burden to US industry, which is why China has created a web of laws that effectively make it illegal to be a reserve currency. The entire east asian bloc has industrialized based on an export led growth model -- that is, exporting more than they import, and thus being accumulators of other nation's currencies. It's not that they need to accumulate dollars, they just need to accumulate some other country's currency, otherwise it's mathematically impossible to run a trade surplus.

A lot of people don't understand this distinction between positive and negative -- e.g. accumulating the currency of other nations and other nations accumulating your currency. These people hold to what I call the fallacy of "the equality of all good things". These are the same people that argue for a "strong dollar" and also "strong exports", when actually these are opposites. I think of this as a form of tribalism, where the analysis is limited to "our guy good, their guy bad. X good, Y bad".

Such people are resistant to trade offs, e.g. you get the advantage of cheap consumer goods by being a net importer, but you have the disadvantage of losing jobs and industries to those nations that are willing to have expensive consumer goods for their populations in order to export more and import less.

In any case, continuing with lists of fallacies, we can say that America having a "strong economy" has little to do with its reserve currency status. Rather, it needs 1) a large bond market 2) investor rights protections 3) a legal framework allowing foreign capital inflows and outflows, with little friction. 4) A relatively stable currency.

To see how important this is, take the example of Russia, which decided that it will sell its oil to India by accumulating rupees. That's great, there was much celebrating "multipolarity" but the fact of the matter is the Rupee has lost over 20% of its value (in dollar terms) since Russia started accumulating it, and India has laws blocking Russia from selling its rupee holdings for other currencies, it can only use those Rupees to purchase Indian goods and take them back to Russia. So now Russia has tons of rupees it can't use except to buy Indian goods, and has started requiring India to pay with Quatari Riyal, as Quatar as more investor friendly laws. Also, there is not that much you can buy with Riyal, when you have two hundred billion dollars of value a year you want to park in some foreign jurisdiction, Quatar just can't absorb that. China isn't willing to accept it. India will accept it but not let you take it out. Where are you gonna put it?

So we see, we have already left the world of "America declining! The Dollar is collapsing!", because like it or not, even though America has tarnished its reputation of respecting investor rights, it's still miles ahead of any alternative when you need to park overseas earnings.

China blocks foreign capital inflows. Europe suffers from all the problems that the US does and even moreso as they are now openly seizing foreign ships and the bank accounts of private citizens - for example freezing bank accounts of people with Russian sounding last names - and Europe has even more barriers to moving money in and out.

So in which jurisdiction will you park your overseas earnings if not the US?

There is no alternative. No alternative is even beginning to appear over the horizon.

While I am holding forth on all these fallacies, another one is what I call the "balloon theory" of trust. This is the assumption that because the US, which used to be a high trust, investor-rights respecting nation, but has begun losing those investor rights credentials after seizing the sovereign assets of Afghanistan, Iran, Venezuela, Syria, as well as other official enemies - that because of this, some other nation must magically arise that will have that reputation for respecting foreign investor rights. E.g. that trust is a balloon, and if you squeeze one part of it, another must by necessity expand. This also comes from tribalism, e.g. the view that if your enemies suffer that you must benefit. But trust isn't like that, it could just be that as the US begins to look less attractive, then no other nation will take its place, and this will create real problems for the export-led growth economies in Asia, as they need some nation whose currency they can accumulate in order to run the trade surpluses needed for them to maintain domestic employment.

re: "you either have strong currency or strong exports"

if i understood correctly, you are stating that the only way to have strong exports is by having cheaper labor ("... losing jobs and industries to those nations that are willing to have expensive consumer goods for their populations in order to export more and import less.")

well, that is one (easy) way to do it, but it's not the only one. for example, you could have more productive labor. i think the fact that underdeveloped countries are still net importers of complex goods such as cars and computers, despite having the cheapest labor, supports this.

also if you allow for some poetry, i guess we could say that trust is like a baloon in the sense that a tiny hole can destroy it completely and abruptly

No, you did not understand correctly if your eyes read "cheap currency" and your mind read "cheap labor". Something went wrong between the text processing unit and the meaning processing unit. Perhaps your meaning processing unit is overwhelmed with all sorts of preconceived notions and voices that are interfering with your text processing unit.

Look, this is not hard. You have two countries, one makes bad apples and the other makes fantastic, amazing, glorious apples. One was seeded by Johnny Appleseed and the other by Johnny Rottenseed. The only labor involved is picking the apples, which both countries do equally well. Does that mean that the GA (Glorious Apple) country will run a surplus against the BA (Bad Apple) country?

No, it will not.

Trade will still be balanced, because the exchange rate will adjust so that neither country is running a surplus or a deficit. Maybe one Glorious Apple is worth 10 Bad Apples. Then the Bad Apple country will import 100 glorious apples and export 1000 Bad Apples.

So the terms of trade, the ratio of GA/BA rises, so that total trade is balanced. It is balanced when one glorious apple dollar is worth 10 bad apple dollars.

The only way that this will not happen is when someone interferes with the exchange rate. Now, if someone interferes, say by making it illegal to sell more than 5 Bad Apples for 1 Glorious Apple, then Glorious Apples will look amazingly cheap to the Bad Apple people, but the Bad Apples will look awfully expensive to the Glorious Apple people, and so this artificial strengthening of the Bad Apple currency will create a huge trade deficit, as people rush to dispose themselves of their bad apples and obtain the superior and affordable glorious apples.

On the other hand, suppose that we see the Bad Apple country running a deficit against the Glorious Apple country. What can we surmise? That for some reason, the investment demand for Bad Apple currency is high, causing people to want to accumulate Bad Apple dollars, even though the Apples made there kinda suck. That investment demand is what creates the trade deficit, by inflating the value of the Bad Apple. And it is the only thing that can cause that deficit.

Nowhere anywhere here does the price of labor enter into the picture. That is a you story -- I would try to fix that meaning processing unit.

> you did not understand correctly if your eyes read "cheap currency" and your mind read "cheap labor".

i actually read "expensive consumer goods for their populations" and concluded "cheap labor", as i pointed out. suppose you ask citizens from nation A and nation B how many hours they'd have to work to be able to buy a certain good. if both answer the same number, then how can you say that the good is more expensive in any one of the nations? and if citizen from nation A answers a larger number than citizen from nation B, so that the good is more expensive in nation A, then how does A not have cheaper labor than B, as one unit of the same good literally buys your more labor from A than from B?

i'm still digesting your apple example.

i'd be interested if you could cite a real case of this happening, because it doesn't agree with everything that i have seen. for example, sometimes the apple business in BA will simply die. this is what i was getting at when i mentioned that "underdeveloped countries are still net importers of complex goods". if you take a mildly complex good like refrigerators or office chairs, chances are that a random not-so-developed country has some local manufacturers. but they're just struggling, not exporting proportionally larger quantities. indeed the only way they'd export K>1 refrigerators for every Samsung imported is if there were 0 exports and 0 imports (so the country is so poor no one has a good refrigerator).

also, suppose that BA produces a total of N apples per year per capita. if the people in GA work the same hours, then GA produces the same number, N, of apples per year per capita, because they are both equally good at picking apples. since trade is balanced, it does not affect the level of value/utility/wealth on each side, whatever the amount of trade. so in the end, for the same hours worked, BA has a total product of N bad apples per year per capita, which is 10 times less than GA, which has a total product of N good apples per year per capita. people in BA are poorer.

assuming people in this economy just buy/sell work and apples, the people in BA must work for less value, i.e. they are cheaper labor. if labor in BA is more or less than 10x cheaper than in GA, then apple orchards will simply close in BA and reopen in GA or vice-versa until it gets 10x cheaper, at which point there's no point in switching. this is moreover compatible with the real anecdotal examples i mentioned i have seen.

i'm open to recommended readings.

It’s very unlikely that the USD will lose its status particularly to the Yuan. You can do that mental calculation yourself. Would you convert all of your lifesavings from USD to Yuans today or in the next 10 years? The answer is probably “not a chance”. The reason is simple, liquidity and trust. China has no comparable open and independent financial institutions international central banks can trust, nor can they have them without surrendering control over their monetary policy. So as long as there’s no alternative to the USD (BRICS will likely fail), it will continue being the default global currency for reserves, debt and trade.

>Would you convert all of your lifesavings from USD to Yuans today or in the next 10 years?

I don't own and dollars and I have no plans to keep dollars now or in 10 years. I own some stock, mostly total world ETFs (traded in EUR, but a significant part of their holdings is obviously American). So does it really matter?

Just checked. The last 2 years yuan was way more stable than USD compared to CHF and the last 5 years about similar.

I don't see why I would prefer USD

Especially, realistically speaking i buy WAY more from china than the US

Economic stability alone is not enough for a currency to be an important store of wealth. China doesn’t have a free floating exchange, it has very strict capital controls and lacks political and legal predictability. You need very specific institutional foundations to have a currency like the USD, which the Chinese political system rejects. The US has an independent legal system. If you have a dispute with the US government you can take it to an independent court. In China, you have no way to sue the CPP. China is a single party socialist republic with all the political authority concentrated at the top, so one high impact event like the sudden dead of Xi Jinping could send its economy into fallout because of political uncertainty. In the US the system is explicitly designed to absorb this type of shocks. So for these and many other reasons the Yuan under the current Chinese political system will never be a serious contender to the USD as global currency, it’s just way too much institutional risk for foreign investors. It’s also very unlikely the CPP will ever pick a Yuan rivaling the USD vs political control over their domestic policy. They can’t have both.

If you are trying to apply lessons from the gold standard era to lessons in the current era of non-convertible fiat currencies, then you are going to draw the exact opposite of the correct conclusions. There is a fundamental difference in how global capital flows work when the world uses specie flows versus when the world does not.

Here is one hint. The reason why currencies like the Spanish dollar or Dutch guilder became standards were primarily questions of prestige and minting quality as you held those currencies in your own possession. But everyone could recognize a guilder and so when dealing with a foreigner, it was easier to have them.

In that type of environment, being a global export power meant that you were a global gold issuer because you sold your goods to the rest of the world, got their gold (or silver), melted it down, and issued your own stamped gold or silver coins, that circulated all over the world.

If that is your mental model of foreign trade today, then please read a bit further in your history books, because we live in the world of non-convertible fiat money. This means that when China sells $100 of stuff to America, it doesn't get to take that money home, the money is kept in an American bank account, with the name of that chinese seller as the beneficiary of the account. It's a non-convertible currency. A dollar is always a dollar, China can't melt it down and convert it to a Yuan.

So now, to be the reserve currency doesn't mean that your specialized minting tech is being stored in central banks all over the world, it means that central banks all over the world have deposit accounts in your banking system. And that can only happen by being the world's largest importer, the exact opposite of the situation in the age of the Dutch trading empire. Your entire analysis is backwards.

At this point it is not a question of whether this will happen but only when. Next to digital currencies and the yuan, Trump has successfully killed the Petrodollar.

The free influx of money, and particularly investor money that gave the US an evergreen advantage will seize. Slow at first, then more and more as time moves on.

My observation is that the Globalization that started from the late 80s/early 90s following the fall of the USSR and the opening of China gives tremendous wealth to the elites based in the US and the EU.

However, its foundation was laid decades ago in the ruins of Western Europe, where financial and intelligence power combine to rule over the Western world. The immense wealth was but a mundane by-product that corrupted the mind.

Fast forward to today, it takes a lot of effort to reverse the trend and remake the US into an industrial superpower.

I feel like the corrupt Trump regime has accelerated this.

what other people tend to forget - money is just an exchange mechanism - the real currency is energy.

europe is already paying for Russian gas in rubble, china will soon exclusively be taking payments in yuan.

with so much green energy coming online - do you really need a massive foreign currency buffer - if you're not buying finite hydrocarbon energy ?

This is not yet about making the renminbi a full reserve currency. China still imposes exchange controls. There's historical reluctance in China to expose the internal economy to external market forces. And a lot of rich people in China who would like to get more money out. This lack of free convertibility limits the use of the renminbi outside China.

The US wields incredible negotiating power period. In way too many fields.

It worked when the country wanted to be a globalist force and lead by example (albeit it was partially pretending to set an example, US exceptionalism is ingrained in US culture and politics).

It doesn't work in an anti-globalist world, especially one in which allies are bullied.

One advantage America has, and will remain having as an advantage as long as its broken: it borrows a lot of dollars. So if China wants to save a few billion dollars, it is super easy to do it by just bidding for US treasuries, rather than trying to convert it to yuan and somehow putting it in its own economy where it won't cause overheating.

America is essentially just a debtor of last resort, that is the superpower of the dollar.

I have heard this hundreds of times before.

I would rather it be Euro than Yen from China

I wonder if it has anything to do with the currency apparently being backed by an immense reserve of oil (proven to the world by this year's geopolitical events), then coal, and then a massive amount of renewable solar, hydro, wind kWh's and infrastructure to deliver it to homes and shops.

More and more it feels like a nation's kWh throughput is the new metric to track its global influence in manufacturing, industry, and financial services. In other words electric power now equates to global power.

The more interconnected the grid gets, the more true this becomes.

I've always sort-of-joked[1] about a "Blood Standard": your status as reserve currency is proportional to the percentage of the world population your nation can murder in 12 months.

Puts a hard floor on nations with strategic nuclear deterrents - they can never fall below a fairly high threshold, no matter how much of a "Security State Zombie" their national economies have become.

[1] I'm not 100% sure it's all me joking anymore.

I mean, Russia's currency is in the toilet, and if even just 10% of their nukes are actually functional they probably kill a significant percentage of the world pop.

Russia's desperately terrible internal financials, applied to any nation lacking strategic deterrence, would have brought them a lot more pain.

I sort of jokingly contend that they're floated by a theoretical "Blood Standard", in addition to the very distributed basket of commodities they built their country on top of.

The problem here is that I've got the mechanism reversed. Blood Standard measures negative power - the capacity to destroy. Reserve status tracks positive power - the ability to keep other states from destruction. So maybe what the Blood Standard really represents is super-sovereignty - you never get under the thumb of IMF, you never get invaded, you don't lose control of internal monetary policy a la Argentina.

Thinking about it, the Swiss break this model, but from the other direction. "We will never ever screw with you" and in return they get seen as safe.

Again it's a bit of a lark, but it's not as funny anymore, as the growth curve in positive economics hits some natural physical limits along with a very deep gravity well.

> In other words electric power now equates to global power.

In living memory, has this not been the case? Oil's use as an energy source is far more meaningful than its material use.

Part of why I always questioned why calling a country a "gas station" was supposed to be insulting. Yea, that's the main ingredient of being a world power.

An interesting move. Something that drives me crazy when interacting with China, is that I can only use American payment methods to make a payment from Europe to China. I pay a fee and the merchant pays a fee both to the US. It just sounds broken. I hope this is a step in eventually resolving this.

You did not make an effort to switch and resorted to the easiest payment method.

Unionpay for example, allows clearing directly in Chinese Yuan and most Chinese native merchants accept them.

I would imagine a big reason for not making the effort was convenience. If they make Unionpay more convenient to use then people will likely be more likely to switch.

No bank in my country offers Unionpay.

Of course, I could get a Chinese Unionpay card/account. Now each time I want to make a payment, I need to move money there, and can I even do that easily from a European bank account?

Of course it's Deutsche Bank, I am sure nothing shady will come of that.

Right. The favorite bank of Epstein's cash account will surely keep its integrity /s

- https://fortune.com/2025/10/08/deutsche-bank-and-jeffrey-eps...

- https://www.reuters.com/sustainability/boards-policy-regulat...

It will be interesting to see how much of Thucydides Trap plays out in currency and trade as opposed to military conflict. I am hopeful that economic and financial warfare absorbs the brunt of the power struggle.

Can you elaborate a little? I suspect it is a well known concept, but its the first time I heard of it in this context.

Rising power challenges the fading imperial hegemony. In this case, CNY displacing USD.

Is China still rising or already in decline?

Relative to the US or Europe? I think you know the answer to that.

Relative to the US it’s not a straightforward answer but China is definitely not rising in the way it was a decade ago and has been outpaced by the us

China has a massive demographic problem in the near future (after 2040ish), and it is extremely unlikely (IMO) that it is going to catch up/surpass the US in GDP per capita within the next decades.

But its relative GDP growth has been higher than the US for decades, is higher stil and is probably going to stay higher for years:

https://ourworldindata.org/grapher/real-gdp-growth?country=U...

But the gap between the us and China in terms of GDP has widened in recent years making it look like China will never surpass the us

Never surpass in what exactly?

If you look at absolute numbers (https://ourworldindata.org/grapher/gdp-worldbank-constant-us...), it seems likely that China will surpass the US economy pretty soon (they're a lot more people though, so per-capita is much worse).

Personally I think its most likely that chinese GDP will be larger than US GDP within 2035, but that the median citizen is NOT going to catch up to US standards in the next 50 years.

And their whole society will run into the exact same problems that many western countries are dealing with already (increasing fraction of retirees), so I'd be very careful with extrapolating their currently superior growth rate past 2040 or so.

The answer is really not a clear cut as you assume any longer.

their yough unemployment rate sure is rising, it sure ain't great to be young Chinese looking for job now

https://www.nytimes.com/2023/08/15/business/china-youth-unem...

https://www.nippon.com/en/in-depth/d01203/

https://www.reddit.com/r/dataisbeautiful/comments/1pedov5/oc...

also there are salary paycuts for people who already have work, my Chinese clients tried this, but not gonna accept it, I will rather lose such client than lower my rate, I am losing money by not increasing my rates over many years already despite huge EU cummulative inflation and EU salaries growth

by my experience visiting country after almost 10 years last year just by looking at salaries, restaurant prices, real estate prices/rent their economy seems to be stagnating in last 10 years, restaurant meal cost pretty much same as 10 years ago, same goes for entry level salaries like waitress, cook and other you can see in street

they are getting stronger overall, though doesn't seem like middle class is benefiting from it, my CN family bought apartment many years ago and they would have problem to sell it for same price, let alone make any profit on it

Yeah, but have you seen their EVs that cost $30,000 and have fold out kitchens and a movie theater in the rear?

I'm not sure that's relevant if you aren't paid so might self to feed yourself.

Also 30k USD is a lot of money everywhere except for in the US

CNY displacing USD would entail allowing people outside China to buy really significant quantities of CNY-denominated financial products. This would entail CNY/USD changing so CNY is more expensive, because the default currency for financial products currently existing is USD. Which would slap a corresponding huge price increase with 0 increase in quality to all Chinese export. Which would murder Chinese manufacturing export. Which would entail laying off some grand proportion of an industry that employs 5% of the _human_ race. Which is why they're not gonna do that.

Same thing that happened to USD, right? Once the USA stopped having to actually manufacture things to get money, it stopped actually manufacturing things.

China is step by step learning that communism actually sucks and doesn't work.

Unless you can have a super intelligence that can monitor every aspect of everything all the time to ensure optimal decisions. Hmmmm...

I’ll believe it when I see it, there’s a spread between onshore and offshore yuan exchange rates due to currency manipulation. It becomes harder to manipulate a currency as more of it is created, and AFAIK countries are not loading up on Chinese govt debt, but I may just be unaware?

The USD hegemony isn’t because of oil, it’s because everyone wants dollar-denominated assets. Treasury bonds, US real estate, US equities, etc. Possibly Chinese exports could soak up some of the yuan demand?

I don't think China wants to make the CNY the reserve currency because it would decimate China as a manufacturing hub. They prefer China to be Jakob to the U.S. being Esau. The red lentil soup can be quite bitter.

President Xi of China mentioned it when the US President visited him in May.

https://www.hks.harvard.edu/faculty-research/policy-topics/i...

utterly repulsive ai slop

Yes, but I liked that the article mentioned how Xi has been saying this for a long time.

I switched the link to Harvard.

thanks, much better

The how of the reference seems important, it's not like he brought it up first apparently

>Xi has referenced Allison’s term before. In a speech in Seattle in 2015, Xi said, “There is no such thing as the so-called Thucydides Trap.” And in an October 2023 meeting with Senate Majority Leader Chuck Schumer, Xi said, “The ‘Thucydides’ Trap’ is not inevitable, and Planet Earth is vast enough to accommodate the respective development and common prosperity of China and the United States.

Do you think Xi's comments are specifically that war is imminent?

Essentially its the idea that the interaction between an incumbent power and rising "challenger" power inevitably leads to war between the two. I was expressing my hope that if this does happen, the war can play out in less destructive arenas - one of which is in the competition for reserve currency status which the US has held for the whole of the modern era. This article possibly points at China's first shots in this conflict.

Edit: credit LarsDu88 for correcting me on its age. I originally stated the idea was very old (2.5k years) but actually its a recent idea based on an ancient conflict between Athens and Sparta

The obvious counterexample would be the previous most powerful empire in the world (ie the UK) ceding that title to the USA after collapsing after WW2? No war between the UK and the US was needed.

The UK was a declining power that had been absolutely gutted by war and owed huge debts to the US that it had accrued to fund the war. I believe Thucydides Trap is more about the situation we have now with the US and China where both are moving from strength to strength.

I'm not really seeing the USA moving from strength to strength lately TBH. Iran is a disaster, the Navy now has 3 (or 4, depending how you count) failed warship projects in a row, economic growth outside the AI/datacenter boom has dropped to near zero and the internal political climate is polarized to the point of inactivity. Most of its traditional allies have been moving to distance themselves from the USA and worldwide trust in the USA as "leader of the free world" is at the lowest point in decades.

But quite beyond that, I'm just saying that the Thucydides trap is not an iron rule. The first place I looked was a counterexample and I'm sure there have been many more over the centuries.

AI is revolutionizing millions of white collar tasks - billions and billions of $$$$ labor requiring years of training, and making those workers wildly more productive. And its impact on robotics hasn't even started.

US is also taking leadership in space, which has deep military implications, telecomm and (maybe?) natural resources.

Lastly, it's a big mistake to write-off the US labor force and consumers, who react very quickly to change.

“The mantle of command”, a FDR biography, goes into some detail on this point. Good read.

The precious powerful empire (before Britain) was undoubtedly the Spanish Empire.

The Spanish-American war was closer to the USA opportunistically feasting upon the remains of the fallen empire (The British already overtook the Spanish in terms of power).

It's hard to pinpoint the fall of the Spanish Empire. But it's even harder to point out military action between Spain and Britain (undoubtedly the rising star in the next centuries). There is the big war of Spanish Succession but that's more opportunistic and more like a major civil war that spilled out of Spain and across Europe.

Lots of war between Spain, HRR, France and other parties. But strangely not so much with Britain....

---------

In both Spanish and British cases, the real enemy the whole time was just a boatload of debt.

> No war between the UK and the US was needed.

No war was "needed" to settle who was #1, it was clear that we (the UK) simply couldn't maintain the empire as it was and we definitely couldn't have fought the US.

We went into WW2 the clear naval power in the world, We exited it in the #2 spot utterly broke.

In less than 4 years the US produced enough ships to eclipse our navy and did it while also producing ridiculously vast amounts of equipment for themselves and their allies across every sphere.

No one with a brain in our foreign office would have even contemplated poking that (and realistically while the US has at times been a questionable ally on the whole in that era they were a reliable ally).

In that kind of total war the side with the larger industrial base wins the war of attrition.

It doesn't matter if the enemy sinks ships if your production rate exceeds the sink rate on a sustained basis you win (somewhat related it's also why naval strategists have been sounding the clarion call about the fact that China now makes more than half of all global shipping, the US is somewhere around 1% - those peacetime yards/skilled works transfer over in a war).

The US did that, they won the war (or their part of it) in the factory lines/mines as much as they did on the actual front.

I agree. My point in the GP was that great power transitions are not ALWAYS accompanied by war between the new power and the previous one, as the Thucydides trap argument seems to imply.

War is costly, so (in the absence of bargaining frictions) game theory suggests that an agreement can be reached that leaves both parties better off compared to going to war.

> Essentially its a very old (~2.5k year) idea that the interaction between an incumbent power and rising "challenger" power inevitably leads to war between the two.

It sounds plausible, but if it is this old there must be a long list of examples. What are some of them?

As LarsDu88 mentioned above, its actually not this old. The idea is recent but is based on an ancient conflict. That is my mistake. The wiki article has interesting info on the examples that the originator saw:

https://en.wikipedia.org/wiki/Thucydides_Trap

Thanks for the list of examples.

It is odd to see a single country being repeated at different times as the "incumbent" power.

The latest example in the list shows "UK and France" as incumbent power and Germany as rising for the 1990s - present.

The US is only listed for the 1940s - 1980s as incumbent, with Japan and Soviet Union as rising.

Its not an old idea at all. Its from a 2012 article by Graham Alison followed by a 2017 book on the rise of China specifically that Xi Jinping read and referenced.

Its claimed to be an old idea, but its actually only recently become popular

You are right. Thank you for correcting me. It never ceases to amaze me just how much I can be confidently mistaken about.

If you want to be pedantic, it actually dates back to 1980, in a talk at the Naval War College https://en.wikipedia.org/wiki/Thucydides_Trap

I, for one, would appreciate if we could just move on past these incessantly destructive power struggles as humanity.

Humans can not “move on” from human nature no matter how much people try to will it

It's as much "human nature" as being a slave was once the nature of some (chosen) peoples.

Conflict between humans is much much more nature than slavery was. Just look at animals. Flock animals often have conflicts which others. But none of them have ”slaves” (at least no how humans understand it)

There is a different between a conflict and a war. Humans are uniquely violent and cruel to each other, there is nothing even close in the animal world

You should learn about chimpanzee wars and how dolphins treat tortoises, and about the enslaving ants

> how dolphins treat tortoises

Do you mean porpoises?

Dolphins are not known for mistreating tortoises but porpoises.

Yes, I messed that up based on phonetic recall I think. Thanks for correcting

Being a slave isn't human nature, but wanting to be a slave owner is. "Human nature" is, more often than not, a shorthand for "the parts of game theory that evolution distilled into humans"

In game theory, cooperation is a dominant strategy and evolves consistently. Slave owners and other injustice committing humans often invoke "human nature" out of trying to cope with their knowledge that it is wrong but whatever trauma or other thing makes them do it anyway, to absolve themselves of agency.

(To be clear, not targeting you personally here, but targeting the rhetoric and fallacy)

Cooperation is an unstable strategy. If everyone else is cooperating and not punishing defectors much, defecting is vastly better for you.

If everyone else is defecting and you can cooperate with a few people, that's slightly better for you. Hence we have high-trust and low-trust societies, gatekeeping, etc.

Sure, and now compare polities which manage to keep defection to a minimum or structure the process of "defecting" to serve the polities purpose instead of being truly adversarial. Bruce Bueno de Mesquitas "the logic of political survival" and various works by daron acemogolu have the data on how much better these polities do.

If there's no pure play dominant strategy, you will always get a fraction of defectors willing to try their luck. But coopération still emerges, and the polities that manage to cooperate more still tend to survive and thrive more.

Many kinds of defecting aren't punished much. For example we don't refuse to buy things made with slave labor. Some people do, but they're an extreme minority. So being a slave owner is rewarding.

It's a fundamental attribute of reality. Take it up with mother nature, because power struggles exist everywhere, even in dumb systems with no intelligence. Weak things go away, strong things stay around. Weak things need to become stronger than strong things to displace them.

Not really, kindness also exists. It is the escape hatch from the evolutionary zero sum game and let's you pick a better equilibrium (bargaining vs pure Nash).

We can just not fight. There is enough room and resources,we can get more of them and build more efficient tech, and we are all more alike than different.

Kindness is an unstable equilibrium unfortunately. Mother nature is totally uninterested in it. Otherwise we would still all be protolife quasi-cells, because consuming other cells and not sharing resources isn't kind.

Maybe you argue that we are human and intelligent, so we can override this inconvenience with a system of our own design. My response would be "Sure, put your guns down and burn them, I won't stop you."

Again, it's an unstable equilibrium. Power on the other hand is dramatically more stable.

Thats your take, I tend to not agree. Nature, with all its balance by destruction, has one approach but we humans can and do things differently in some cases, for our greater benefit.

We don't kill weak links in our population just like mother nature intended and keeps doing left and right everywhere all the time, a good chunk of this forum would not pass those harsh and often random tests yet its/ours added value is non-trivial and surpasses any additional effort by society (at least I like to think that).

'Everything good in this world is kindness'. I have yet to meet a person, situation or story where this would not apply.

Are humans without agency then?

There's more ways of neutralizing power than meeting it with equivalent threat. You can also make it not worth exerting the power, or introduce enough friction to let it evaporate itself.

And so far, the highest historical power concentrations have always been un-stable, while the polities that put checks on that power and embed themselves in cooperative trade networks lasted for much longer

Meh, that "empathy is weakness" is just an ideology, not the historical thing. Nazi lost the war after all. Fascists in general tend to start wars and then loose them, precisely because their arrogance and lack of empathy makes them unable win long term.

The constant war of all against all with no kindness kind of societies don't do all that well, actually. Human societies do best when the kind people assert themselves against sociopaths. And human societies do worst when the sociopaths get free reign.

There's more than enough energy and resources to go around for humans to peacefully coexist "forever", albeit in lesser numbers than today. The civilization meta game is what ruins it, despite our best attempts to regulate that. And a global self destruct button helps massively... until it does not.

Like I replied to the other commenter, it's an unstable equilibrium. Lots of things can stay perfect forever if nothing throws off the delicate balance.

We can focus effort on maintaining this balance...but doing that requires power to be used. And just like that we are back at step one.

We can communally build up trust to such a high level that everyone can act independently to maintain balance, but this naturally creates a situation where the more trust there is, the bigger the payoff for the one who breaks it. Essentially the prisoners dilemma.

China has some internal documents that address the Thucydides Trap with a Chinese idiom, "There are no just wars in the Spring and Autumn Period."

> China has some internal documents

how did you get to see them? that must be a very interesting story.

It depends on what you find interesting. No crazy spy stories but I've been learning Chinese, so I've spent more time looking at things that are only written or said in Chinese.

Project 2025 wasn't really secret but it wasn't in the public consciousness until about a year later https://trends.google.com/explore?q=project%20202&date=today...

China also has a bunch of political philosophy nerds that crank out wonky policy papers. I keep finding references to this one by Wu Bikang, https://www.rmlt.com.cn/2014/0403/253621.shtml

I'm still very bad at Chinese and I don't assume that I understand that paper well, even with translations, but that paper clearly interprets the Thucydides trap very differently from how it's discussed here.

Which of I understand the Wikipedia article correctly would mean it's a euphemism for "there are no just wars"?

Chinese idioms can be notoriously difficult to interpret. From what I've seen, they're often an abbreviation of some passage from a famous text. The listener is expected to know the rest of that text and all the major commentaries that go with it.

I absolutely do not have a solid grasp of the full works of Mencius and I have fairly anemic knowledge of the derivative works but I'm fairly sure it's not just a simple euphemism.

My read of the idiom is that Chinese political philosophers claim that the basis of Western political philosophy is the balance of power between hegemons and the basis of Chinese political philosophy is the concept of the righteous rule/mandate of heaven.

His implication seems to be that Western nations are held together primarily by force whereas the CPC primarily maintains power by serving the people.

Change happens gradually, and then suddenly.

it also stops, reverses, is interpreted incorrectly, has unforeseen second order effects, etc.

In the immortal words of Milhouse, "First it started falling over, and then it fell over."

worth noting that one main reason why this didn't happen sooner is because China didn't want it to -- while the RMB as a reserve / trading currency strengthens its status and weakens the US', it also makes it harder for China to control the exchange rate, which in the past it considered to be a strategic imperative.

The thing I hate the most about current world affairs is the american money printing machine. It is spreading their own internal inflation through out the whole world and we have to suck it hard just to keep their political dominance.

Waiting for the dollar to collapse in the next 100 years and see what it brings to the political arena whether it's for better or worse. I am not afraid of the devil showing off its ugly face, whoever the new devil may be.

Judging based on where nations put their diplomatic money, pretty much every major nation in the world (except maybe Japan) has a negative outlook for the USA.

Even the UK is spending a lot to upgrade their embassy in Beijing.

What does that mean?

It means the dollar is dying.

People have been saying the dollar is dying since the 19th century. They said it again during the Great Depression, the end of Bretton Woods and the 2008 Financial crisis..

The difference is now the US has a leader that is actively encouraging its downfall.

And people actively rooting for it even

US dollar value was held by several pillars, among which- pax americana, petro dollar/assets and innovation sector. Pax americana is dismantled by US itself. Petro chemicals are threatened by ren transition and China. Tech sector still ensures having a lead in innovations. Guess what'll happen when/if pax americana will be fully dead, most important economies like EU/China/India will be able to supply own needs with less petrol products since the rest will com from ren and when/if tech AI pops/turns into a fiasco. Nothing lasts forever and US dollar is no exception

Those people were right, it’s just that it will take more time that what they though.

Look at a 100 year purchasing power chart of USD, doesn't look very healthy...

What did it mean when JP Morgan setup the first such relationship with the pboc in 2018?

It means you can settle an international transaction in CNY with Deutsche Bank. Imagine a European lender financing a project in Nigeria that involves purchasing a lot of infrastructure from China.

It means that nations are beginning to abandon (or at least hedge against) the dollar as the world's currency, due to the host nation's instability and global political situation. "Great Again", indeed.

Idk why you say so, but the Deutsche Bank is not a national bank.

they didn't say it was

The use of "nations" in that comment is not clear nor substantiated, not in the comment itself, nor in the article. So just to be clear that DB is not tied to a nation, even though the name suggests it is.

And do nations use Deutsche Bank's services?

Yes. For instance, the National Bank of Ukraine has an account at Deutsche Bank.

Do you also make this clarification whenever Bank of America is mentioned, such that no one is confusing it with the FED?

OP means the USD & US nation is not stable, hence DB looking to clear Yuan.

Layman here, from what I understand this is a major news : it means China is allowing a foreign corporation (european commercial bank) to offer Yuan currency services to clients. Given how tight of a currency control policy the CCP has, it’s quite surprising that they would let a foreign based company into their currency dealings.

The ccp has allowed foreign banks to offer yuan services since before it existed, there isn’t an effective way for them to prevent it and it’s the basis of all that foreign trade they do.

What’s new about this is that a European bank can clear yuan directly without a Chinese bank intermediary. That’s a big deal but duetche isn’t the first foreign bank to do this. Singapore has banks that do this already. And JP Morgan clears directly in the states.

Basically before if Deutsche bank wanted to pay a Chinese bank, it had to use some intermediary like Bank of China Frankfurt. Now it can settle with the chinese-mainland bank directly.

I have this pet theory that is fueled with ignorance but kind of make sense to me: The correct value of the USD would be adjusted to match the tech company valuations sans AI(Apple can be a good guide IMHO) when they serve 350M people instead of 8B people as AI makes software obsolete and the geopolitics and the US government behavior dismantles any network or lock in effects.

I'm interested to understand your theory better but right now the way you've expressed it is hard to make sense of for me.

As I said, it is fueled with ignorance and I’m sure that it is complete bullshit when examined closely but the reason I kind of find it possible is that currently the American companies have a reach that is order of magnitude bigger than the American population and their valuations as well as their profits are based on that. What America is currently doing is dismantling of the world order that made this possible, therefore the American companies will have drastically reduced reach, i.e. Apple for example, won’t be able to sell hundreds of millions of iPhones per quarter because there are not that many Americans to buy that. Instead of the Market crashing in nominal values, maybe the value of the dollar we will crash. So Apple will still be $4T but an new iPhone will be $10K.

Yes, I’m just throwing some bs numbers around but IMHO things will have to make sense eventually when US can’t just print infinite dollars without crashing its value and Apple can’t just sell iPhones to the entire planet due to wars and trade barriers that are becoming the new normal.

You're not wrong in theory. If you're a small country, your currency's day-to-day purchasing power is influenced strongly by your imports and exports. If you have few things other countries want to buy, there's less demand for your currency, and it will go down in value as expressed in your trade partner's currency. A sustained trade deficit (more imports than exports) might mean your currency goes down and down in value. Certainly if some politicians decide to close the borders, you will export even less, but will probably still need some necessities from abroad, and you have a financial crisis.

The US is a huge whopping exception to this strong correlation between the balance of trade and currency strength. US exceptionalism is usually wrong, but in this case, the US dollar being the 'reserve currency' of the world is an incredible boon. The US has been able to sustain a huge trade deficit for decades without sky high inflation (you think it's bad now, it's nothing). In fact, foreign goods keep getting cheaper and the US dollar and services keep getting more valuable. A lot of this is because foreigners are willing to keep their savings invested in dollars (stocks & bonds, including the magnificent 7) rather than selling off their dollars to buy e.g. Chinese goods.

Also note that the tech companies make up a small portion of imports/exports.

But.. If trade restrictions (or security concerns) make it harder for the magnificent 7 to make money abroad, their profits will go down and there could also be an outflow of capital that puts inflationary pressure on the dollar, just because US stocks and bonds are less attractive - the trade deficit increasing would also contribute a bit, but it would be a much smaller effect.

An economy being propped up by foreign capital is not just a US phenomenon, the Asian Financial Crisis of 1997, Turkey 2000, Mexico 1994 - these crashes all were cause by sudden capital outflows. The proximate cause was a short term arbitrage trade, rather than those currencies being in extensive (structural) demand.

This concern is also why China doesn't let foreigners invest directly in Chinese companies. You can only buy weird derivative certificates that trade on a Hong Kong exchange and are subject to tight capital controls if need be.

Things like a domestic tax on imported goods/services (also called tariffs) are unlikely to lower the trade deficit unless there is already an industry domestically to absorb the demand.

> US government behavior dismantles any network or lock in effects

You should look at where most of the compute of the world is physically located. You might have a shock.

This compute is made in China and Taiwan with European tooling, it’s not really a natural reserve that US holds a grip on. What US has is some of the IP but with the invasion of Greenland and later Taiwan patents and IP becomes unenforceable in this hypothetical scenario.

"It's hard to argue that the yuan isn't undervalued. As the International Monetary Fund noted in its country report published in February, China's external position "is assessed to be stronger than the level implied by medium-term fundamentals and desirable policies." The yuan has nonetheless fallen in real terms due to China's low inflation.

Indeed, the renminbi has depreciated in real terms four years in a row, registering a cumulative 14% decline since 2021, according to IMF economists. They estimate China's real effective exchange rate could potentially be up to 20% undervalued.

China watchers Brad Setser and Mark Sobel, both former U.S. Treasury officials, go further and say the yuan is probably undervalued by as much as 30%. Setser has long argued that China's official balance of payments data understates the country's real surplus and that customs data is the more accurate barometer. By that measure, the trade surplus would be a percentage point of GDP wider."

https://www.reuters.com/markets/europe/chinas-yuan-is-underv...

Currencies are basically commodities whose value is based on supply and demand.

Demand comes from other countries wanting to buy your currency (or things they need to pay for with your currency). For example, much global oil is priced in dollars, so if you want to buy oil you need to buy dollars. If you think the US dollar is a good place to park your foreign reserves, then you are buying dollars. Thinks the US stock or bond market, or real estate, etc, looks like an attractive investment, then you need to buy dollars.

If a country wants to boost the value of it's currency then they increase interest rates to make it more attractive to foreign investors, or reduce the supply by selling bonds (taking dollars out of the market).

So ... it's complicated. Supply and demand, but tons of factors that go into those.

I wonder if this might be a reaction to the "blindsided" ECB, following a US decision to prop up the Japanese yen. This would be an interesting fracture. https://www.ft.com/content/d9922d0b-51a0-48be-811b-42e08f909...

Doubtful. The clearing house thing must have been in discussions for years already.

I'm curious what other banks have this ability? Is this the first foreign yuan clearing bank in Europe or in the World?

Singaporean banks have been able to do this for a year or two as well.

JP Morgan clears directly as well.

Is it a yuan or is it a Renminbi?

Both. Renminbi is the currency name, while the yuan is the base unit.

It's a little confusing, but technically RMB (renminbi) is the official name of the currency and CNY (yuan) is the base unit of the currency. Think of it like the difference between USD ("US Dollar") vs "dollar and cents", except there is no fractional yuan equivalent of cents, so it's all just yuan.

Pretty sure the jiao (角) (1/10th of a yuan) is still in use?

Oh yeah, you're right, I forgot about that. It doesn't really get used much except occasionally for very small transactions, usually ones less than 10yuan.

nobody really use jiao (1/10th RMB/CNY), same as nobody really use yuan (CNY/RMB)

they are called mao (1/10th RMB/CNY) and kuai (CNY/RMB) in China

but mao pretty much dont exist anymore now with electronic QR payments everywhere even in food stalls, heck even beggars have QR codes and fen is for many many years more like some monopoly money papers

No there are cents, they are called fen (分).

It's in Japan that it's all just Yen.

Yeah, you're right, you just literally never see any transaction using the 0.01 unit (fen) and only very rarely see any transaction use the 0.1 unit (jiao).

Isnt 0.1 one mao?

That's another name for it, yes. Similarly, yuan is sometimes colloquially called kuai. Sort of like dollars vs bucks.

Japan has sen (銭) as well, the coins were just inflated into oblivion years ago. Still used for eg stock prices though.

Oh interesting. In China it is still used (you can still see prices with decimals beyond share prices and petrol stations) though on the way out.

So the conversation might go, "Hi we're Deutsche Bank - we're able to clear renminbi transactions up to one million yuan." ?

That would most likely be the most correct way to say it, yes.

The currency code is CNY or Chinese Yuan. Yuan itself is like “dollar,” with many different countries calling their currency “dollars.” Renminbi refers to the Chinese currency as a whole rather than any particular unit.

Fun fact: the Japanese yen and Korean won are both cognates of "yuan". The character 圆 simply means "round" as in circular.

it's actually "kuai" (pronounced same way as popular incorrect name of famous The Bridge on the River Kwai (the correct name is K(h)waE)) in Chinese streets, if you use yuan or renmimbi you will sound like you pretend to be some snobbish TV news host

I don't think I've ever used anywhere in street, shop or restaurant yuan/renmimbi, at least not in Beijing and around, some people may use yuan, hardly anyone renmimbi

here you have AI answer based on Reddit thread, which I can confirm is correct:

"In everyday spoken Chinese, kuai (块) is overwhelmingly the most common term used to state prices. Yuan (元) is used in formal writing and official contexts, while renminbi (人民币) names the overall currency system like "Sterling" or "USD" rather than a daily price unit."

As a Western analogy, GBP has similar levels of formality:

Reminbi ~= Pound Sterling

Yuan ~= Pound

Kuai ~= Quid

Is quid really used in UK by 80-90% people? I thought it's very informal slang word (of some lower educated people), in China most of the people just use kuai (well I guess not bank tellers).

Pretty much everyone uses it in informal settings in my experience.

In a professional environment, people usually say pound.

The distinction is context-based, not class- or education-based.

It's my understanding the same is the case for kuai vs yuan as well?

> Is quid really used in UK by 80-90% people?

I deal with Brits on a daily basis.

I seldom hear them use the term "pound". Everyone says quid.

Ah, yes, the best way to react to increased authoritarianism in the US is to checks notes begin doing more business with a country that is the final word in authoritarianism.

the big difference is that China is not bombing anyone, and causing chaos to it's allies..

> not bombing anyone

Not that they wouldn't bomb Taiwan if they thought they could get away with it. The reason they can't, of course, is that doing so carries the risk of starting a thermonuclear war with the United States.

> causing chaos to it's [sic] allies...

Well, there's two ways to think about this.

1) China doesn't really have allies. They've a long history of pissing off their neighborhood extending back centuries.

2) They very much are causing chaos to allies, given that the Vietnamese went so far as to buy American military goods to help defend their portion of the South China Sea, which China sees as theirs.

> Not that they wouldn't bomb Taiwan if they thought they could get away with it.

There is zero evidence of this. The last time China even engaged in a direct military conflict was the 1970s. Where as even before Trump America could have invaded almost any country on the planet. and it wouldnt have been to shocking.

> There is zero evidence of this.

Ah, all those exercises are just for fun.

No, they're for force projection. The ideal success with Taiwan is to convince them with a hearts and minds play.

> The ideal success with Taiwan is to convince them with a hearts and minds play.

Which is very hard to do when you're threatening them with force projection.

"Hearts and minds" isn't a thing totalitarian governments understand. You're either in agreement with them, or you're wrong.

The conundrum is, if you don't have the force projection, then you have the possibility that the wise and correct Party isn't all-powerful and all-knowing, because they couldn't convince a relatively tiny island - one closer than Cuba is to the US - to join the mainland.

If wise and correct Party isn't all-powerful and all-knowing, well, then power and knowledge might reside elsewhere that could need consultation every once in a while, and the wise and correct Party isn't wise and correct.

That's inherently fatal to totalitarian systems of government.

> There is zero evidence of this

You're either being willfully obtuse, have very little knowledge of the relations between the Republic of China and the People's Republic of China, or are here to troll.

It's absolutely on the CCP's agenda to bring Taiwan under PRC control, by force if necessary. This has been one of their main objectives since the KMT fled to the island when the CCP captured the mainland. [0] The Strait is arguably one of the hottest geopolitical areas on Earth with major implications for pretty much everyone.

As far as "direct military conflict", depends on your definition of that. If the PLA is having one of its units regularly attack American or Western digital infrastructure, I'd very much consider that to be an attack, and there's plenty of evidence of that. There have also been border skirmishes with India.

[0] https://en.wikipedia.org/wiki/Cross-strait_relations

They are supporting countries doing the bombing…

Apparently a controversial opinion now...?

Or threatening to invade it's allies.

Except

  1. Illegally occupying Tibet and cleansing the region 
  2. Occupying and cleansing several regions like Uyghur or Hong Kong
  3. Wars with neighbors like India and conflicts with all neighbors except North Korea
  4. indirectly arming Russia
  5. Taiwan

If China had a fraction of American power, they would be making life miserable for a lot of countries.

The best way to handle it is indeed equidistance between the two other poles, positioning oneself as the weight that could tip dominance either way and having the other two trying to woo you.

Basically Yugoslavia's foreign policy during the Cold War, but on a much bigger scale.

Grow up man, we need people to grow up and see the world for what it really is before we can fix it

You go against the government (for real) in ANY country you get a bullet, simple as that...

That is everywhere...

In USA, China, Russia, Paraguay, Laos, or wherever you go look...

Ah, yes. That's how it ended for Joe Biden, right?

"It's all the same", just isn't true. If it were, you wouldn't see any conflict.

False equivalence. Also funnily you left out Europe, why?

For instance, you can mock Trump and question the US all day.

You can’t do that in China. Even this website is banned in China.

> For instance, you can mock Trump and question the US all day.

It's less dangerous to do this in the US, but it's still much worse there than it was even a decade ago.

But much much more dangerous than the US in China still.

People who've been to China consistently report that you can mock the regime and people do, but in private.

So, in a way that will have zero impact on the political course of the nation?

Does complaining about Trump have an impact on the political course of the nation?

It kept him out of office for four years. It could have more impact.

As bad as Trump is (and he's bad) he's still nowhere near as bad as Xi is.

Let's look at the Six Defining Characteristics of Totalitarianism (Friedrich and Brzezinski, 1956):

* An elaborate guiding ideology [typcially focused around patriotism and loyalty to the state above all else]

* A single political party, typically led by a dictator

* Use of instruments of terror such as violence and secret police to control the population

* A government monopoly on weapons

* A government monopoly on means of communication (such as state-controlled media and heavy censorship)

* A state-controlled economy

In none of those categories is the United States as far along as the PRC under Xi. At least one of those categories would require a large amount of bloodshed for the US to reach the level that China is.

> It kept him out of office for four years.

So if people stopped complaining on the second day, he would've been in office on the third day?

> do, but in private.

Yeah, thanks for confirming my point.

> For instance, you can mock Trump and question the US all day.

Only if you are US citizen (so already locked into the system) or never plan to visit the US.

But it's very likely you won't be let in and in worst case be interrogated for several days if you try to. Or even worse if you aren't white.

So nah, it's not that easy and definitely not that "free speech" for anyone.

Would this also mean we can get a EuroDollar systems for the Yuan? As in, Deutsche Bank can create loans denominated in Yuan without Chinese central bank control?

A bank can do this already. But it puts them in an awkward position for hedging their currency risk as they can’t be assured that they’ll be able to cover any shortfalls or invest any surpluses.

I actually don’t know the ends and outs of the pboc clearing rules but to get access to the mainland repo funding and official fx rates you have to be in good standing so direct clearing banks like deutche and J.P. Morgan in practice are more under Chinese control, not less.

Eurodollar is based on physical cash reserves outside of the USA, right? Otherwise they can indirectly control it.

B...b...b...but who's going to take care of AML procedures and FATF regulations. We'll get drowned in money laundering! :D

Cozying up to China warrants caution. But moving away from USD is an absolute imperative. It's good to have options, you know.

Deutsche banks slogan should be "If you need to do something shady call Deutsche".

At some point china will loose the ability to keep its global currency (Yuan, should be inflating) decoupled from the domestic one (Renminbi is deflating). They have been keeping long running issues in Banking, and Relestate at bay but a global recession (and were on the cusp it seems) is going to be brutal to china.

I suspect that if (when?) that hits this will turn into another Deutsche scandal.

You are getting down voted, but folks really need to look at DB extremely shady history.

Read the list for yourselves: https://en.wikipedia.org/wiki/Deutsche_Bank#Controversies

I pointed out the actual issue at hand for china with its currency - and that implies why DB would be a solid choice for them to use that bank.

The thread devolving into a debate about "reserve currency" is - to be blunt - deeply misinformed. Chinas bond liability and the currency its priced in is the ultimate contra indicator into how its going to handle the coming storm.

Somehow, “euroyuan” doesn’t quite have the same ring to it.

yuanro

euroan

Glad to see more forms of liquidity for offshore yuan

I don’t really see the sinophobia as relevant at this point in history, or the US dollar pride as beneficial to the world aside from its unparalleled and impressive liquidity.

Everything should be liquid and thats the project for the world in the finance sector, adding rails for major currencies is foundational infrastructure.

Reserve currencies and soft power should be antiquated concepts.

Nations will have to learn harmony a different way.

The end of the Petro Dollar?

Soviet-China-Iran - Petro Yuan?

/edit for the pedantic. Russian Federation.

There won't be a petro-anything. In 30 years the oil industry will no longer be the resource upon which the whole world turns, and will instead be just another industrial input.

There was never a petro-anything. It's always been and is the Eurodollar global reserve currency. https://en.wikipedia.org/wiki/Eurodollar

One can only hope.

This current crises has been a boon for alternative energy sources.

Really has driven home the point to even the most 'head-in-sand-right-winger' that Solar is a National Defense issue, not a woke agenda.

Soviet?

Russia and Iran are irrelevant in the global economy.

> Russia and Iran are irrelevant in the global economy.

They're modest by raw economic size, but outsized in relevance due to energy resources and geopolitical leverage.

Iran is irrelevant?

You probably haven't turned on the news in a little while.

Russia is 9th world economy by nominal GDP [1]. Larger than many European and Asian countries.

Also I am surprised that China is so close to US (20 Trillion vs 31 Trillion). The gap is less than 2x now.

[1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28no...

Don't think that China stands that close with Russia and Iran. Or needs them, for that matter.

Trump is making China great again.

Pity about the USA....

After he already decimated the meat and oil industries. How very woke of him.

Bank who did some dark stuff with Trump and Russia is working with China? I'm shocked!

"but at what cost" ?

I'll pay.

https://genius.com/Jc-chandor-margin-call-boardroom-scene-an...

If there's one thing you can do now that will set you up for the next 20–30 years: it’s learning Mandarin.

With advanced AI real time translation I don't see any need for that.

With pervasive AI agents, intrapersonal trust between humans is going to be more important than ever.

Completely real-time translation is an impossibility since languages have different sentence orders, so it will always be an awkward filter with fits and starts that erodes trust.

The trouble is that a billion people speak Mandarin already and many of them speak very good English as well, so your own skillset as a second language learner isn't very likely to be valuable. Unfortunately learning any language is rarely a valuable market skill on its own.

Right now Mandarin speakers in Europe are in high demand for contract support, it's different when you have a translator on a site with culture matching yours then having it in contractor's country.

tell that to my wife - native Chinese speaker - unable to find job in Europe, what you say may work for someone speaking perfectly local language (other than English), but not for just English/Chinese combo without 3rd language

just language itself isn't enough

I don't like, trust or trade with China.

But america xD

It's very easy to avoid American products (there aren't many here in Europe you can't easily avoid) but it's kinda impossible to do the same with china.

Except software/web, avoiding US tech is kinda complicated too.

Not a good thing. China is an authoritarian regime, which we need to reduce dependency on, not increase it.

The US is not that different.

The US is infinitely worse, at least China is predictable.

Yeah, can't say I disagree. I expected Trump to be authoritarian but I thought he'd actually at least try to be smart about it.

You don't know the meaning of the words. Ask the Philippines how unpredictable China is in the South China sea.

You don't know who is the President of the USA.

And how is that relevant? You have a bad habit of routinely making extremist statements without backing them up. It is not the first time I have seen you do it.

The US is not an authoritarian regime. To call it infinitely worse than China in this regard is false, and is a laughable claim. The President will be out in a few years.

This is risible: comparing unpredictability with authoritarianism. Ever heard of apples and oranges?

The US is only predictable in its unnecessary belligerence.

As for the president, who will be out in a few years, thank you for proving my point: the next one will be different. Unpredictable what that fellow will do. At least we know China will be authoritarian.

And as for extremism, let me add the only group more extremist than the US are ISIS and their ilk: "with us or against us," killing civilians without trial (Venezuela most recently), Albright saying on TV that the deaths of "half a million children was worth it." Shouldn't even mention Hiroshima and Nagasaki.

Your actions are extremist and you're offended by mere words?

Mr. Sanjay Mehta,

Hiroshima and Nagasaki were absolutely necessary. It was Japan who had attacked the US first in Pearl Harbor. Japan was not willing to surrender without both of these attacks.

The attack against Iran was a necessary one. Iran was responsible for many US casualties in Iraq during the US-Iraq war. It was necessary to punish Iran for these terrorist actions. Iran is a terrorist country that funds terrorism across the Middle East. Do you like terrorists? Granted, the war hasn't gone how the US anticipated, but this lesson was learned only in retrospect.

> comparing unpredictability with authoritarianism.

No. Please recursively scroll up to the parent comments in the thread, all the way up to the comment by BaardFigur. The thread is about authoritarianism. You don't get to revoke what it is. Now who's risible.

Mr OutOfHere:

I expected the pathetic excuse for the nuclear genocide of the two Japanese cities. The real reason was to frighten the Soviets. Not going to waste my time on this aspect any more: educating the wilfully ignorant and propagandised is not my job.

The US triggered the Iraq/Iran war. Not just that, they supplied Saddam with precursors for chemical weapons. Later used the same as an excuse to depose him.

Real reason for attacking every oil rich country is always oil.

Speaking of authoritarianism, THIS is on HN right now: https://news.ycombinator.com/item?id=49294199

The real world knows exactly what the US is, thanks to President Trump's honesty in being a war criminal. Unlike the series of war criminals preceding him. Including the precious Obama.

The US is not unpredictable. It uses up its old weapons every decade so it can stock up new ones and keep defense contractors in business for modernization purposes. It's very predictable. You just don't want to be on the receiving end. The Middle East is a source of endless wars. Maybe next time it can be against the Houthis in Yemen which too are terrorists.

I said this up there:

> The US is only predictable in its unnecessary belligerence.

So in a nutshell, you agree the US is an extremist, terrorist state.

What are you arguing with me about now?

China is predictable. See how it was smoother during Du30

China is more authoritarian but the US under republican presidential administrations has been more more militarily aggressive. Every single Republican administration has initiated invasions of other countries and every Democratic administration has at the very least engaged with overseas bombing.

The question is whether this makes folks more or less likely to hold dollars vs yuan as reserve currency

We also need to reduce our depency on USA which is currently signaling it is a hostile nation that consider and invasion of Europe in the form of an occupation of Greenland. It is possible USA:a admin is just lying about their hostile intentions but that in itself is a reason to reduce dependence on America

The USA is also currently signalling hostilities towards Brazil. They're hostile to all.

> We also need to reduce our depency on USA

True, but trading the USA for China is not a wise move, if only because China would never ever have stepped up in WW2, and will not provide any support in the future either, except --Buddha willing-- by selling arms.

Is choosing your favorite hegemon going to be based on WWII Hollywood stories?

Blood money isn't red in color. USA has more war crimes in the past 5 decades than almost all other major countries combined. But that doesn't matter when you're profiting. Same goes here.

I’m impressed. I had to scroll down ten top level comments in order to find a contentless but-China-regime comment. Good work HN.

I think other nations are not asking themselves which country has the best human rights record. That time has passed. Trump and Putin have pushed the world back to pure power politics. All the middle powers want to be less open to US blackmailing by diversifying. They know China is not their friend, but the US isn't either, and China is more predictable.

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