Jia Jinjing

Senior Fellow, Chongyang Institute for Financial Studies, Renmin University of China

Since Hong Kong’s Stablecoin Ordinance came into effect in August 2025, many companies from the mainland had rushed to apply to put RWA (Real World Asset) on-chain in Hong Kong.

RWA refers to bringing real-world assets such as real estate, bonds, carbon quotas, and data rights into the blockchain’s decentralised finance (DeFi) ecosystem for collateralisation, trading, or serving as value carriers.

Earlier, on 18 July 2025, U.S. President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), which officially linked the U.S. dollar and U.S. treasuries with stablecoins.

The legalisation of stablecoins would potentially modify the world’s underlying settings. If the world lives on the “circulation of currency” as its “blood circulation,” then the transactional relationship between “goods and money” is the “life activity” of the real world. In the past, the world’s basic setting was “one unit of fiat currency corresponds to one unit of goods or services.” But now, it could be “one unit of fiat currency corresponds to one unit of goods or services, or to one unit of stablecoin.” The relationship between “goods and money” could become a triangular relationship of “goods, stablecoins, fiat currency.”  

I. This “Game” Is a Big Gamble

Eighty years ago, with the end of World War II, the world entered the Bretton Woods system. The system stipulated that under the gold standard, gold was pegged only to the U.S. dollar, and the U.S. dollar was in turn pegged to other currencies.

From the perspective of countries other than the U.S., this means the establishment of a global market network with the U.S. market as its hub. Global enterprises could borrow U.S. dollars to produce, then sell their products into the U.S. market to earn U.S. dollars, and then to deposit these U.S. dollar earnings in the U.S. banks. Financing → Production → Sales → Payment  → Savings could all circulate within this system predicated on the U.S. market and the U.S. dollar. This global economic arrangement has handed the U.S. dollar its global monetary hegemony.

However, from the perspective of the U.S., this global economic order is now facing an unsustainable situation: for the rest of the world to obtain U.S. dollars, the U.S. has to maintain trade deficits; but to keep the value of the U.S. dollar as a world currency stable, the U.S. could not remain permanently in deficits. This contradiction is known as the “Triffin Dilemma.”

The “Triffin Dilemma” makes the structure of U.S. dollar hegemony inherently unstable. It is like a game of “passing the parcel,” with each player gambling that the burden would not fall into his hands. The main reason that this order has managed to last until today is that the U.S. stock and bond markets have been serving as the depository in this U.S. dollar’s global circulation. Global exporters convert a considerable portion of their U.S. dollar revenues into dollar-denominated assets, such as U.S. stocks or treasuries, which allows the U.S. dollar to remain relatively stable despite growing U.S. trade deficits. However, the price of this arrangement is the “hollowing out” of the U.S. economy. Over time, increasing number of foreign companies are listed in the U.S. stock exchanges, and the valuations of U.S. stocks and bonds are increasingly reliant on global buyers.

The sustainability of the present global economic order fundamentally depends on the liquidity of the U.S. dollar, which is affected by interest rate changes, and the U.S. interest rates are ultimately depended on the credit guarantee of the U.S. government. Therefore, the U.S. Treasury is not merely a national institution, but also the treasury that provides credit guarantee to the world’s singularly most important currency.

II. The U.S. Has “Started a New Game” for the World payment

The problem is: the present game is on the verge of collapse.

Due to the U.S. debt ceiling standoff in June 2023, Congress froze the debt ceiling at around $36 trillion. At the start of Trump’s second term in January 2025, the White House had about $670 billion left in its coffer, but the interest payments on existing debts due in 2025 amounted to $1.3 trillion, averaging over $100 billion per month! That means even if the White House “neither eats nor drinks”, it can only cover half a year of interest payment.  

Against this backdrop, President Trump launches a series of manoeuvres:

“Mass layoffs”: The Department of Government Efficiency (DOGE), led by Elon Musk, carries out large-scale cuts in federal government employment and spending projects. The goal is to cut cost

“Tariff war”: On April 2, President Trump announced his Liberation Day’s reciprocal tariffs. By the end of July 2025, U.S. tariff revenue for fiscal 2025 has reached $152 billion, nearly double that in the same period last year. The goal is to raise revenue.

“One Big Beautiful Bill” Act (OBBBA): On July 4, Trump signed the OBBBA, a massive tax cut and spending act that is expected to increase U.S. government deficits by $3.4 trillion over the next decade. The goal is to flood the system with more liquidity.

“GENIUS” Act: This stablecoin bill fundamentally links the U.S. dollar and treasury bonds with digital assets, thereby making the digital virtual economy one of the pillars of U.S. fiscal policy. The goal to siphon off liquidity.

“Raising revenue”, “Cutting costs”, “Flooding” and “Siphoning Off” of liquidity - behind all these lies one main objective: to mitigate the challenges arising from U.S. debt interest payments. These manoeuvres could eventually culminate in the U.S. shifting its fiscal foundation from real to virtual economy and potentially moving the world economy fully into a virtual play.

Since U.S. dollar liquidity is the lifeblood of world economy, America’s structural shift into a virtual play could result in a fundamental change in the world’s macroeconomic underpinning.

III. Entering a Future of Dissonance

The U.S. uses the U.S. dollars from its current account to buy the world’s goods, while the rest of the world recycle these U.S. dollars through the capital and financial accounts into U.S. stocks, bonds, real estate, and other assets.

Over time, as the U.S. de-industrialises, it becomes the world’s hub for debt creation, reliant on collateral and leverages.

On the other hand, as China evolves and upgrades its manufacturing capacity, it emerges as the world’s centre of asset creation, reliant on production and consumption.

On a notional global balance sheet, China would dominate the asset side on the left, while the U.S. would dominate the liability side on the right.

Since the start of the 21st century, China has generated increasing cash flow for the world economy by continually expanding its manufacturing capacity. This cash flow, being largely U.S. dollar-denominated, provides the foundation for America’s ever-growing debts.

But since 2025, the new reality is that the U.S. has grown weary of generating debts, while China has grown weary of generating assets.

U.S. debts expansion is presently being restrained by the burden of soaring interest payments. The Federal Reserve’s balance sheet, after peaking at $8.81 trillion in 2021, has indeed reversed into decline, now down to about $6.63 trillion.

The U.S. has now staked its hopes for future debts expansion on digital assets. But from digital assets to stablecoins, what future does that hold for the U.S.?

One likely outcome is “Japanification of the U.S.”.

We have already seen multiple rounds of boom and bust of the Bitcoin, which reminds us of the Japan’s real estate bubble in the early 1990s. Then, Japan real estate valuations kept inflating cycle after cycle, and companies that entered at the market peaks were left to shoulder the interest burden. Once the real estate bubble burst, the assets in these companies’ hands plummeted in values, while interest obligations remained, and most of their cash flows had to be diverted to debts servicing. As a result, while companies and assets might continue to exist, they were reduced to the status of “zombie enterprises”. This is the essence of a balance-sheet recession, which drove Japan into its three lost decades.

If America's future depends on using AI-generated data as collateral for its real-world economy, what could the U.S. rely on to avoid a catastrophic balance-sheet crisis?

In the past, American's role as the world's primary debtor and China's as its primary manufacturer were two sides of the same coin. However, as America pivots to this new game built on illusions, China is unlikely to play along.

China's refusal to play along isn't just about avoiding a trap; it is also a reaction to measures taken by the West to decouple from China.

Take EV as an example.

As compared to combustion-engine cars, EVs are just “power-banks on four wheels”. EVs’ real appeal is in the technology and the users experience. Every EV is a node in a vast and interconnected ecosystem, comprising the charging networks, the Internet of Vehicles (IoV), autonomous driving. This connectivity allows each individual EV to leverage the power of the entire network to create a next-generation technological experience.

EVs are just one facet of the New Quality Productive Forces China is rapidly developing, with the potential of offering the world a new kind of economic ecosystem.

So why haven't Chinese EVs triggered a global wave of disruptive innovation? Is it a problem with technology or manufacturing capacity? Or is it simply a political problem, fabricated by the U.S. and the West?

The current game, as played by the West in general and by the U.S. in particular, is not sustainable. In the meantime, while the U.S. might have started a new game, but it may just be a mirage in the desert.

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