This report is part of the larger compendium “Future-Proofing U.S. Technology: Strategic Priorities Amid Chinese Tech Advancement.”
Read the full report
Read the full compendium
Executive Summary
The People’s Republic of China uses alternative payment methods (APMs) to advance its foreign policy, diversity its currency holdings and work as a counter to U.S. dollar dominance. Following Russia’s invasion of Ukraine in 2022, APM’s have been utilized greatly to blunt the effect of economic sanctions and build a long-term strategy to respond to future economic statecraft policies from the United States and its allies. Policymakers should view China’s use of APMs as warning signal of possible conflicts in the South China Sea and Taiwan.
In recent years, China’s APMs strategy has become more targeted by using de-dollarization to blunt the effectiveness of economic sanctions. Additionally, tools at its disposal, such as its leading role in the BRICS group and implementation of central bank digital currencies (CBDC). While BRICS members have considered APMs initiatives before, like the New Development Bank and BRICS Bridge, proposals at the 2024 Kazan summit represent a significant acceleration in the institutionalization of APMs among its membership. This was most evident in the newly proposed alternatives to the SWIFT financial payments system such as the BRICS Cross-Border Payments Initiative (BCBPI).
Early Warning Signals in China’s APM Landscape
This policy report explores the APM landscape following the Russia-Ukraine war, China’s proactively cautious approach to APMs in its work to raise the profile of the renminbi and diversify foreign currency holdings, and pinpoints common signals that could increase the probability of a Chinese escalation, including an invasion of Taiwan.
As China pivots its APM strategy, U.S. policymakers will need to consider the implications of this for (a) maintaining the dollar’s position as the world’s reserve currency, a key part of President Donald Trump’s election policy platform and (b) the effectiveness of sanctions as a foreign policy lever in the event of an invasion of Taiwan. A priority among several recommended actions for this administration would be the creation of an APM Strategic Coordination Unit to monitor early warning signals that would point to an increased probability of an invasion. The unit’s remit would be to ensure information-gathering and rigorous scrutiny of these signals, and to serve as a convening body for departments, working groups, and agencies across government. This will ensure the U.S. is unified, coordinated, and prepared to respond to APM developments that would indicate an increased probability of invasion.
Policy Recommendations
- Establish an APMs Strategic Coordination Unit to monitor the development of China’s APMs strategy and developments that occur in Russia and groupings like BRICS.
- Monitor Global CBDC Developments to determine priority early warning signals and follow rise of e-CNY, mBridge and potentially a BRICS Bridge.
- Explore stablecoins as a means of maintaining U.S. dollar hegemony.
- Leverage the deterrent effect of sanctions.
Gavin Moore is a global finance specialist and Director at ForgeFront, a policy and futures consultancy. He has developed cryptocurrency anti-money laundering and terrorist financing rules for a financial regulator and led tariff policy for the UK’s Treasury. He has been a head budgetary adviser in the European Parliament and has published works in academic journals and industry outlets.
The views expressed in this article are those of the author and not an official policy or position of New Lines Institute.
