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#24: Your Economics Questions Answered (III)

Posted: July 5, 2025

Want your economics questions answered? Send them to se4wp@proton.me, or on Instagram (@read.sewp).

Thanks to @crazy_rich_bayesian on Instagram for this week's question.

People talk about the US dollar being the “world currency” and China had pegged its currency to the U.S. dollar for many years— can you explain what global currencies mean for a multi polar world ie US imperialism and the growing threat of new forms of Chinese imperialism in the Philippines, India, South America, Africa, etc…?

This is an incredibly important question for the future of the global economy, so we’re going to go a little long this week. The Dollar System, its post-WWII institutions, and its credibility, are in long-term decline. Proactive projects like the BRICS+ New Development Bank (NDB) are progressing slowly and deliberately, but an alternative global currency/payment system is still undoubtedly in development, rather than imminent. However, Washington’s ongoing reckless sanctions barrage, and the Trump regime’s tariff “strategy,” are accelerating the use of short-term quick fixes. These include increasing trade in local currencies rather than USD, as well as waves of demand into gold, in the face of a further depreciating and weaponized dollar.

At the moment, the main multipolar currency dynamic is the increasing use of local currencies in global trade (i.e. Brazil and Russia trading in real or rubles rather than USD). This has been institutionalized in agreements like: the India-Russia Rupee-Ruble mechanism (primarily to keep Russian oil flowing to the world despite Western sanctions); China’s Yuan-Based oil trades (i.e. Saudi Arabia has been accepting Yuan for oil, a catastrophe for the petrodollar component of the Dollar System); and the ASEAN Local Currency Framework (Indonesia, Malaysia, and Thailand have been conducting mutual trade in their own currencies). This practice will only become more normalized and reciprocal (in the face of inevitable American attempts at retribution). However, while trading in local currencies can wean the world from the USD, it doesn’t inherently do anything to accomplish the necessary balancing of global trade.

With the world’s sharpest economic minds still in the process of devising such a balanced global trade system, I am not qualified to speculate on exactly what it might look like. From a socialist economics perspective, the most important development we must watch for is development of an ‘anti-imperialist’ global currency or trading system. This would combat unequal exchange (the financial root of imperialism) by incentivizing balanced global trade and enabling balanced development. Due to the uneven and combined development of capitalism, with competing capital always following maximum returns, imbalance is as baked into any capitalist economy as labour exploitation and generalized commodity production. While they are varying degrees of anti-imperialist, the BRICS+ economies are also all either outright capitalist, or contain prominent market components. This raises many questions: is balanced global trade possible in a capitalist world system? Will the NDB develop another global reserve currency like the USD, but controlled by a global organization rather than a single nation? To get some clarity on these issues, let’s take a look at a historical example of a balanced global trade system: John Maynard Keynes’ idea of an international clearing union (ICU) and the ‘bancor,’ at the 1944 Bretton Woods Conference.

Keynes’ ICU would convert all trade surpluses or deficits into credits and debits in ‘bancor,’ a new unit of international currency. Each national central bank would have an ICU bancor account for their overall surplus/deficit, removing bilateral surpluses and deficits. Each national currency would have a fixed but adjustable bancor exchange rate, which would be pegged to gold. Creditor countries’ surpluses would be available as cheap credit to debtors, rather than to lend at market interest rates. Countries with persistent surpluses would be charged rising interest rates on surplus above a set level, encouraging surplus reduction through currency appreciation or encouraging foreign investment. Countries with persistent deficits would be charged interest on deficits above a set level, encouraging currency depreciation or prohibiting capital exports. Any excess year-end credit balance would be confiscated and used by the ICU to perfectly balance international trade with the total sum of bancor balances (credits-debits) at exactly zero.

Behind Keynes’ proposal was his recognition of a main obstacle to international trade balance: trade adjustment was “compulsory for the debtor but only voluntary for the creditor.” While there is a hard limit (zero) on a debtor’s reserves, the sky’s the limit for creditor surplus. In this way, debtor’s must always borrow more, but creditor’s always have a choice to lend or not, always to their advantage. In theory, the ICU addressed this issue, but material reality (powerful creditor interests) led to the Dollar System being adopted at Bretton Woods, instead of Keynes’ ICU. There was insufficient incentive beyond international balance to induce surplus countries (the USA in 1944) to forgo the economic benefits of their surplus, to favour deficit countries. Instead, the imperialist Dollar System, with its hyper-imbalance favouring the Americans, won out.

Keynes’ was a liberal capitalist at core, able to push the limits of reform while abhorring revolution. This inevitably leads to plans like the ICU where capitalists/creditors ‘should’ act against market incentives for a ‘greater good’ that undercuts their advantages. This proposal is especially interesting coming from a Brit at a time when the Empire was officially lost. Would a 19th-century British economist have endorsed such a system when Britain was a massive creditor rather than debtor? Absolutely not. This raises a central conundrum of the NDB’s ability to succeed: will China, the leading BRICS+ economy, forgo its economic advantages in exchange for global trade balance?

To address it, I want to do a little Leninist analysis of the question on which this hinges (is China imperialist?) to further clarify and ground this issue. To paraphrase Lenin’s definition of imperialism from Imperialism: The Highest Stage of Capitalism, imperialism involves: monopoly concentration of production and capital; a financial oligarchy merging bank capital and industrial capital; capital export rather than commodity export; a complete territorial division of the whole world by international capitalist monopolies.

Let’s first home in on the financial oligarchy aspect. The Chinese banking system centers on the ‘Big Four’ state-owned banks: the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC), and the Agricultural Bank of China (ABC). For reference, these are larger than their American counterparts like JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, and would hence be the breeding ground for a Chinese financial oligarchy, sitting at the intersection of bank and industrial capital. However, the Chinese banking sector is rooted in the public sector, with politics in command of economics. Along with much stricter regulation on securities and capital flows, this seems to put top Chinese bankers in a far less personally lucrative position to their American or European counterparts.

For example, take Jiang Jianqing, former chairman of ICBC, the world’s largest bank with trillions in assets. While he did have an extremely high salary compared to an average Chinese labourer (~$300,000 USD), his estimated 2022 net worth (via Forbes) was less than $1M. Despite relatively par status in terms of global economic power, it would be tough to call this man an oligarch in the same way as Jamie Dimon, CEO of JPMorgan Chase (2024 compensation: $39M; 2025 net worth: $2.7B).

We can see this further by looking at the list of Chinese billionaires. Basically everyone on the Chinese list is directly connected to production, while lists of Western billionaires are rife with bankers and investors. Additionally, the number of billionaires within China, as well as their individual fortunes, are generally decreasing, unable to join in on Wall Street’s massive asset inflation because of strict Chinese capital controls, and the CPC’s more pragmatic (rather than the West’s basically evangelical) attitude to national stock markets in general.

Whether it’s the ongoing deflation of the Chinese housing market bubble in the wake of the Evergrande scandal, or the severe legal/political repercussions faced by Jack Ma (the founder of Ali Baba) when he tried to IPO Ant Group, the financial services group behind AliPay (CPC critics said this IPO would introduce forbidden private elements into the Chinese banking system), from their actions, it seems clear that the CPC is committed to preventing the development of a financial oligarchy. Additionally, the Chinese banking sector seems to prioritize use value (production) over exchange value (asset prices). Whether it can maintain this control into the future is another question, but like so many other China-centric questions, that will be up to the will of the Chinese people. So on a domestic level, it seems like the People’s Republic of China is lacking the financial oligarchy aspect of Lenin’s definition of imperialism.

Let’s also take a look at the ‘capital exports’ element of Lenin’s imperialism definition, through the lens of both the Belt and Road Initiative (BRI), and the NDB global trade system with which we began. For decades known for cheap commodity exports, in addition to high-tech, high-value-added manufacturing goods, the Chinese have been exporting more and more capital, particularly through the BRI. But is the BRI an imperialist project? The BRI is unfolding in real time, so I think we need to view ongoing Chinese economic integration with nations in Africa, Southeast Asia, South America, etc., similar to the NRB’s pursuit of balanced global trade, through its development of anti-imperialist economic structures. The CPC’s emphasis on ‘win-win cooperation’ does come through in infrastructure projects that enable development, and thus easier trade, between China and these nations. However, the historical imperialist overexploitation (by the West, not the Chinese) of many of these regions does mean that a) China usually ‘wins more’ because of stronger, more sovereign economic and political institutions, and b) China does benefit from existing imperialist underdevelopment (i.e. cheap rare earth materials from the Democratic Republic of Congo fuel the Chinese tech sector). These conditions are not necessarily of China’s creation, but they will lead to legitimate claims of imperialism if the Chinese do not work to actively overcome them as the BRI unfolds.

An honest pursuit of global trade balance as discussed above would mean China is not building a new material system of imperialism in the same way as the American or British did. Lacking a financial oligarchy, or Dollar System-esque imperial reserve currency paradigm, I don’t think it is correct to call China imperialist at the moment, simply based on the market elements of their mixed economy. While Chinese companies do benefit from remnant Western imperialist overexploitation, Chinese imperialism as a historical-material structure simply doesn’t exist today. Avoiding the possible imperialist pathway would involve a truly balanced currency/trade solution that overcomes the inherently destabilizing dynamics of capitalist development. Commitment to this system by capitalist countries (no matter how anti-imperialist they might be) will bring greater internal contradictions between balanced global trade and uneven internal capitalist development.

Even in the most favourable Marxist-Leninist reading of Chinese socialism, with the PRC as the global beacon of socialist development, the capitalist basis of other BRICS and BRI economies will lead to antagonistic contradictions down the road. However, the CPC and PRC’s commitment to more cooperative global trade seems genuine, and no matter how China’s economy is classified, if nothing else, they enact their plans. In this way, it seems that the more pressing concern than ‘is China imperialist’ is ‘can the CPC’s anti-imperialist impulses continue denying the development of a domestic financial oligarchy, and lead the construction of a global trade system that undoes the economic legacies of Western imperialism?’ Whether Chinese or not, this is our shared struggle.