Opinion | Why China is steering clear of the US’ ‘exorbitant privilege’ model - South China Morning Post
Chow Chung-yanChow Chung-yan began his journalistic career at the South China Morning Post and rose to become editor-in-chief in 2025. Published: 9:30am, 11 Sep 2026The Chinese export juggernaut shows no signs of slowing, rising by a quarter year-on-year in August and putting the nation well on track for another record annual trade surplus after becoming the first in history to surpass the US$1 trillion mark last year.While much of the world remains preoccupied with debating China’s so-called overcapacity, an equally consequential phenomenon is frequently overlooked: the profound impact of Beijing’s trade strategy on the internationalisation of the yuan and the broader global financial system.China is now the world’s top trading nation, accounting for roughly 15 per cent of global exports – a milestone last reached by the United States during the mid-20th century. Historically, such trade dominance often led to a financial paradigm shift. As American industrial power crested in the early-to-mid 1900s, New York eventually supplanted London as the world’s financial capital, and the US dollar superseded the British pound as the primary global reserve asset after World War II.
Yet China is carving out a fundamentally different path. Both the British pound in its prime and the US dollar today have functioned simultaneously as the default medium of exchange for global trade and the ultimate store of value as reserve currencies. Beijing, by contrast, is aggressively encouraging its trading partners to adopt the yuan for cross-border settlements while maintaining its stringent capital controls. We are consequently witnessing a deliberate decoupling: the internationalisation of the yuan as a transactional currency but explicitly not as an unconstrained global reserve store of value.
This strategy bypasses the classic structural trap that redefined Anglo-American finance. Under the traditional dollar framework, supplying the world with liquidity requires open capital accounts and deep financial markets that attract global capital inflows – a dynamic that pushes up the currency’s real exchange rate and routinely leads to current account deficits. While proponents label the ability to borrow cheaply in one’s own currency an “exorbitant privilege”, it can systematically hollow out a nation’s manufacturing base over time.
Chinese leaders are firm believers in the hard power of industrial capacity. They have no intention of following that script.
