Why US sanctions threats against China aren’t credible

Summary

The article argues that US sanctions threats against China regarding its relationship with Iran are not credible due to US vulnerabilities in the AI sector and bond market. It posits that such actions would accelerate the adoption of the Chinese yuan by trading partners, potentially undermining the dominance of the dollar in cross-border payments.

Market Context

This commentary suggests a potential shift in global payment infrastructure from SWIFT/dollar-based systems to yuan-based alternatives, which could impact the financial sector and currency markets. The reference to the 'AI bubble' introduces a counter-narrative to current AI investment trends, potentially affecting sentiment in tech and semiconductor sectors.

Key Drivers

• Article claims US bond market precariousness and AI bubble make US more vulnerable to shocks than China
• Assertion that removing Chinese institutions from SWIFT would accelerate yuan adoption by trading partners
• Argument that US sanctions threats against China are not credible

Risks

• Article is an opinion piece lacking specific data, dates, or named institutions to verify the 'precarious bond market' or 'AI bubble' claims
• No evidence provided that trading partners have actually switched to the yuan or that SWIFT removal is an imminent policy action
• The claim that the yuan is a 'perfectly functional' alternative is subjective and lacks quantitative support in the text

Time Horizon

Long Term