China will remain an ‘incomplete superpower’ until it can catch up with U.S. financial might, market veteran says

President Donald Trump’s summit with Chinese counterpart Xi Jinping ended last week without a major breakthrough, but still achieved Beijing’s goal of putting itself on equal footing with the U.S. Meanwhile, China’s industrial might continues to drive export dominance, its AI is nearly on par with the top models, and its military is increasingly advanced. With the U.S. bogged down in Iran, alliances fracturing, and debt soaring, the narrative on America has pointed in the opposite direction, namely a superpower in decline. “But in at least one field — financial competition — the opposite is true. China is stagnating, allowing America to dominate by default,” Ruchir Sharma, chair of Rockefeller International, pointed out in a Financial Times op-ed. The history of the world’s previous empires shows that increasing economic clout typically leads to a currency taking a greater share of global reserves, he noted. But China’s yuan, or renminbi, claims just 2% of central bank assets around the world, even as the Chinese economy accounts for 17% of global GDP. Similarly, China commands 15% of global trade, while the yuan is used in only 2% of invoices. By contrast, the dollar accounts for about 58% of global reserves, though that share is slipping, and 54% of trade invoices. Plus, nearly 90% of over-the-counter foreign exchange transactions are in dollars. Sharma estimated that the world’s second largest economy is running 30 to 40 years behind the historical trajectory of superpowers. This lag is also notable given how much global finance has exploded, with the value of financial assets quadrupling over the last five decades. Federal Reserve The “exorbitant privilege” of dollar dominance has long been known, allowing the U.S. to borrow more cheaply than its profligate finances would otherwise allow. The U.S. has also leaned heavily on the dollar to impose financial sanctions—a weapon the yuan can’t provide.