I don’t really see why China would care all that much whether G7 economies go into recession as result of the US attacking China.
Everyone’s economy is connected, when the US went into recession in 2008 the world went down with it. That’s the problem with having a single reserve currency (this is eventually going to change but as for now that’s the reality). If that currency’s respective country shits the bed, then everyone else that relies on it for transaction will shit the bed too.
Obviously China doesn’t want a repeat of 2008 so it’s a toss up on whether they’ll quit trading with the US to pressure them to pull out of the SCS (and hurt the rest of the world in the process) or continue trading so that the world doesn’t enter a recession.
The big question is whether dedollarization is remotely feasible by the time the operation takes place.
Everyone’s economy is connected, however as Russia showed already, it’s entirely possible to decouple for hostile economies. It’s also worth noting that China is very much aware of the dangers here and have been massively diverting their trade away from G7 https://asiatimes.com/2024/05/2-words-explain-china-export-surge-global-south/
If China stops trade in dollars, then other countries will just start using yuan, or perhaps the BRICS currency will go online by then. Either way, this is not an insurmountable problem by any stretch of imagination.
Meanwhile, what ultimately matters is the relative damage to BRICS vs G7 economies. This is also what we’re seeing playing out with the economic war on Russia where G7 economies are coming out worse off and as a result we’re already seeing a lot political instability in Europe.
I can’t disagree with anything you’ve said, but I still feel that China might choose the route that alienates the least G7/ EU member states.
Even if some users here feel it’s foolish for China to expect US “allies” to hold their own interests above Washington’s, China might not burn trade deals that could jeopardize relationships with Europe. China is still working on expanding trade with the EU at the same time it’s working with Russia and Iran.
China’s interests don’t 100% line up with its allies’ interests. The US on the other hand expects its enemies to be the enemies of their allies as well, but China knows that doesn’t need to be the case.
It could be that China tries to turn the trade war against the US by playing both sides, while the US will undoubtedly escalate. If it turns out to be the case, then this could further alienate Washington from their EU allies.
This paves the way for more Chinese trade and more expansion of the BRI into Europe, while simultaneously reducing Washington’s influence on trade in the region.
Tldr: China taking the nuclear stop trade with us option is a possibility, but they might just play the long game so they can end up on everybody’s (except US) good side 10-20 years down the line.
I don’t expect that China would burn trade deals with countries unless they have to either. However, I do think it’s realistic for China to say that they wish further payments to happen in yuan the way Russia did with roubles after being frozen out of SWIFT. Europeans might grumble a bit about it, but when push comes to shove they have no choice but to go along with that.
The main problem for China is that if it continues to be reliant on SWIFT then it’s exposed to financial warfare by the west. Hence, why I think China will want to avoid doing trade using western financial system as much as possible going forward.
So, I agree with you that China will likely be very surgical regarding what trade it cuts with the west entirely, I do expect it to nudge the countries it trades with to start increasing trading outside the dollar going forward.
