China This Week: China-Russia Warn on Nukes; Altman Faces Congress on AI; Asia Considers Dollar Alternatives
This week, we follow China’s global moves — from nuclear warnings with Moscow to Altman’s AI testimony — and ask: Is Asia quietly undermining the US dollar’s dominance?
China Quote 🗩
"Chinese policymakers will probably find ways to keep the published unemployment rate close to their target for this year, but this may mask broader weakness in the labour market as a downturn in exports reduces new hiring, increases underemployment and weighs on wage growth.”
Julian Evans-Pritchard, head of China economics at Capital Economics
The Return of Currency Wars?
The US dollar hegemony is coming under attack in Asia. Bankers are reportedly seeing demands for local currency derivatives that bypass the dollar, trade tensions started by the United States playing no small part in it. Dollar has played an important role even in settlements between local currencies but now the search for alternatives is heating up. Will this be catastrophic for the dollar? The dollar selling this week points to a momentum, however it is too early to talk about the future of dollar as the reserve currency. Bloomberg reports that Stephen Jen, of the "dollar smile" theory possibly sees a US$ 2.5 Trillion ''avalanche'' selling that could destroy the long term appeal of the dollar.
The short term selloff is a sentiment that is short term in nature, and could change if sanity were to return to trade policy, and the 1980's euphoria were to subside in 1600 Pennsylvania Avenue. What does it mean for de dollarisation, and the US signaling a strong pushback for any such shift?
In March 4.1% of global settlements were in yuan, a steady uptick, compared to 49% global payments being settled in the dollar, yuan still had a long road ahead. The shift away from dollar has no strong contended. The Chinese government is pushing for settlements now in yuan, but the faltering economy and the palpable tensions related to trade will be strong in the middle run. The yuan is a cheaper hedge due to attractive loans but does not have the requisite liquidity offshore that would make it a strong contender to the dollar. Could it be a regional alternative? This is an interesting possibility as the Chinese exports are turning away from the US-Europe and finding better ground in Asia. Access to markets in South East Asia, the GCC has improved. With the political turning of the page between New Delhi, and Beijing it could be interesting to see if it results in greater market access.
The dollar can be moved away from the commanding position it holds in the world but there has to be remarkable shifts in the global order before it can happen. There is significant movement and perhaps some of those remarkable changes are under way. Pat Buchanan, the predecessor of Trumpian politics, wrote a book about the shifts in the world vis-à-vis US position due by 2025. The book reads like a manifesto by the current dispensation in the US and there is much there that needs to be examined, evaluated, and perhaps corrected but the year of change could just be 2025.
Economic Activity🏦
China Cuts Policy Rate, Bank Reserve Requirement Ahead of US Trade Talks
John Wu writes in S&P Global that the People’s Bank of China has reduced the 7-day reverse repo rate from 1.50% to 1.40% and lowered the reserve requirement ratio by 0.5%, aiming to boost liquidity and economic support. The move precedes key trade talks in Switzerland between Chinese and US officials, amid rising tariff tensions.
China Railway's Debt Climbs Higher Even as Profits Recover
Kohei Fujimura writes in Nikkei Asia that China State Railway Group posted a 17% rise in 2024 net profits, continuing its recovery from pandemic-era losses. However, its debt rose to 6.2 trillion yuan as it prioritised network expansion, adding 2,457 km of high-speed rail. Passenger and freight volumes also rose, but investment spending outpaced revenue growth.
Record Land Prices Return as Developers Bet on Prime Plots
Caixin Global reports that Chengdu’s land auction market has revived, with developers aggressively bidding on prime plots. In March, China Merchants Property Development paid a record 31,700 yuan per square metre for a residential site—70% above the base price—after 130 rounds of bidding. The trend suggests renewed confidence among major state developers in top-tier urban real estate.
Inside China🐉
Ten Dead After Tourist Boats Capsize in China
Yvette Tan writes in BBC News that at least 10 people died and 70 were hospitalised after strong winds overturned four tourist boats in Qianxi, Guizhou, during the May Day holiday. President Xi Jinping called for strengthened safety measures following a string of recent transport accidents, including a helicopter crash in Suzhou and a fatal boat collision in Hunan.
Ancient Chinese Poems Reveal the Decline of a Critically Endangered Porpoise Over 1,400 Years
Sara Hashemi writes in Smithsonian Magazine that researchers used over 700 classical Chinese poems to trace the historical range of the Yangtze finless porpoise, revealing a 65% habitat decline since the Tang dynasty. The study highlights how literature can serve as early ecological data, showing the sharpest declines in the last century due to human interventions like dam construction.
China Welcomes Back Physics Star Lin Shaozhen – and Out Comes the Online Abuse
Shi Huang writes in the South China Morning Post that Lin Shaozhen, a biomechanics researcher trained in France and Singapore, has returned to China to join Sun Yat-sen University. Despite his stellar academic record, Lin has faced online ridicule over his appearance linked to a medical condition.
China and the World🌏
China and Russia Accuse US of Raising Risk of Nuclear War and Vow to Respond to Threats Jointly
Liu Zhen writes in South China Morning Post that Beijing and Moscow condemned US policies as escalating nuclear risks, citing alliance expansions, missile deployments, and the “Golden Dome” defence system. In a joint statement, they pledged coordinated responses to military provocations, opposed weaponisation of space, and accused the US of undermining arms control through nuclear-sharing and biological activities.
US Ability to Defeat China in Taiwan Threatened, Top Indo-Pacific Commander Warns
Demetri Sevastopulo writes in the Financial Times that Admiral Samuel Paparo warned the US may struggle to maintain military superiority over China in a future Taiwan conflict, as Beijing rapidly expands weapons production. While asserting current US readiness, Paparo highlighted China’s accelerated military drills and global reach, noting the PLA is preparing across the full spectrum of Taiwan invasion scenarios.
Trump Says China Tariffs Will Come Down From 145%
The Straits Times reports that US President Donald Trump expressed optimism ahead of upcoming trade talks with China, saying punitive tariffs of 145% would likely be reduced. Speaking at the White House, Trump suggested both sides were eager for a deal and hinted at possible direct communication with President Xi. Talks in Switzerland this weekend mark the first step towards de-escalating tensions.
OpenAI CEO Sam Altman and Other US Tech Leaders Testify to Congress on AI Competition with China
Matt Brown writes in AP News that OpenAI's Sam Altman, alongside executives from Microsoft, AMD, and CoreWeave, urged US lawmakers to support AI infrastructure and global competitiveness amid escalating rivalry with China. The hearing addressed national security, export controls, energy demands, and concerns over a fragmented AI regulatory landscape, with bipartisan calls to preserve US leadership in emerging technologies.
China Challenges the Next Pope
WSJ reports that China is pressuring the Vatican during its papal transition by pushing for bishops loyal to Beijing, bypassing Joseph Zhang Weizhu, a Vatican-recognised bishop in Xinxiang. This move tests the 2018 Vatican-China agreement and the next pope’s resolve to resist political co-option by the Chinese Communist Party in religious matters.
Tech in China🖥️
Satellite Images Reveal Huawei’s Advanced Chip Production Line in China
Eleanor Olcott, Zijing Wu, and Chris Cook write in the Financial Times that Huawei is rapidly expanding its semiconductor manufacturing capabilities in Shenzhen to reduce dependence on foreign tech, despite US sanctions. Satellite images show Huawei-affiliated sites producing 7nm smartphone and AI chips, supported by state funding and domestic equipment partners. Analysts see this as a major state-backed effort to localise the entire AI chip supply chain in China.
De/Cypher Data Dive📊
A nationwide population-based mental health survey in China showed that the lifetime prevalence of mental disorders was 16.6%, with anxiety disorders, mood disorders, substance use disorders, impulse control disorders and schizophrenia among the most common.
By 2015, China had established 2,936 mental health service facilities, comprising 42.1% psychiatric hospitals, 43.2% psychiatric units in general hospitals, 10.0% community and primary health care centers, 3.3% mental health clinics, and 1.5% rehabilitation facilities. The number of psychiatric hospitals and general hospital psychiatric units had grown rapidly in recent years.
Image of the Week📸
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Microessay by Amogh Dev Rai
Data by Bhupesh
Edited by Aurko
Produced by Decypher Team in New Delhi, India