When Money Flees, Power Follows - Part II

Contemporary Echoes: China’s Modern Financial Fragilities

View of Lujiazui, Shanghai’s financial district, on an evening walk along Suzhou Creek in January, 2022

Contemporary China mirrors the deep historic precedents outlined in Part I, demonstrating liquidity’s role as a fundamental pillar of sovereignty. During Mao’s era, liquidity remained strictly centralized, even as social and economic structures teetered on collapse. This tight control allowed party elites to secure institutional loyalty through steady paychecks and maintain a social base. By preventing liquidity fragmentation and capital flight, the Maoist state retained enough fiscal coherence to survive — ultimately buying itself the internal stability needed to pivot toward Deng Xiaoping’s reform era. While Deng’s reforms have delivered unprecedented material benefits to the Chinese people, they have also empowered a sophisticated parasitic financial class that mirrors that of the Qing while nurturing a dollar dependence mirroring the Ming’s dependence on silver.

China’s current industrial and financial architecture is fundamentally anchored to continuous dollar inflows—needed to settle trade balances, secure critical imports (especially commodities and advanced technologies), and stabilize domestic credit and manufacturing systems. Beyond onshore dependencies, Chinese developers and state-owned enterprises (SOEs) rely heavily on offshore dollar borrowing, creating an externalized monetary vulnerability. Moreover, American authorities today exert far greater control over the flow of dollars through economic instruments — such as tariffs and sanctions — than the Spanish or British empires could have ever imagined. This fundamental dependence on dollar liquidity has made contemporary China highly vulnerable to external shocks. As history shows, when external shocks combine with domestic ones, the result is liquidity flight from the core.