In the context of increasingly tense international situations, the two major powers, China and the U.S., are not only competing fiercely in geopolitical, military, and technological fields but are also staging a silent 'cold war' in the economic and financial realms. This war is not a simple zero-sum game but a 'battle of confidence' and 'systemic battle' that affects global supply chains, capital flows, and national sovereignty. This article will deeply analyze the core battlefield of the China-U.S. economic and financial war, extreme situations, and how ordinary investors should respond.

I. Dollar hegemony and the internationalization of the yuan: A contest of financial power

The global dominance of the dollar

• Dollar settlement system: Over 80% of global trade, energy, and commodities are priced in dollars. The U.S. controls the global financial lifeline through the SWIFT system and financial sanction tools. Once the U.S. decides to 'target' a country or company, the corresponding financial system will collapse rapidly.

• Federal Reserve's policy tools: The Federal Reserve influences global capital flows through policies such as interest rate hikes and quantitative easing, causing the global economy to suffer direct impacts from U.S. policy adjustments.

Strategic layout of the internationalization of the yuan

• Current situation and dilemma: Currently, the yuan accounts for only 2% to 3% of global trade and financial markets, making it difficult to shake the dollar's position in the short term. Although China is promoting the 'yuan settlement circle' and cooperating with regions such as Russia, ASEAN, and Africa, these markets are relatively limited and carry significant risks.

• Response strategy: China is striving to build a cross-border payment system (CIPS) and promote the digital yuan, hoping to establish a settlement network relatively independent of the dollar system, becoming an important pillar of financial defense.

Summary: The essence of dollar hegemony lies in the U.S. setting and controlling global financial rules, while the internationalization of the yuan is more of a strategic defense, difficult to achieve complete replacement in the short term.

II. Chip war: The 'logistics war' of modern warfare

The U.S.'s technological blockade strategy

• Semiconductor lifeline: The U.S. attempts to cut off China’s technology supply chain in high-end manufacturing, AI, and big data by restricting the export of high-end chips and blocking key equipment (such as ASML lithography machines).

• Industrial chain balance: The U.S. relies on companies like TSMC and Intel to dominate the global semiconductor industry. Once technological blockades are implemented, China's research and manufacturing of high-end chips will face unprecedented bottlenecks.

China's response and challenges

• Current situation analysis: At present, China's chip manufacturing level can only reach 7nm technology, and EDA software and precision equipment are largely dependent on imports, with slow progress in domestic substitution facing technological barriers.

• Long-term layout: China is investing heavily in developing 'domestic semiconductors', accelerating independent research and development across the entire chain from underlying hardware to design software, but this process may take more than ten years.

Summary: In the short term, the U.S. can implement precise strikes against China through technological blockades, while China needs to rely on its vast industrial chain advantages and continuous investment to seek breakthroughs in long-term competition.

III. Internal contradictions: Real estate, local debt, and social confidence

Economic internal friction and hidden dangers

• Real estate market dilemma: The explosions of companies like Evergrande and Country Garden are just the tip of the iceberg. The overall downturn of the real estate market not only exhausts land finance but also leads to a shrinkage of public wealth and weakened consumer confidence.

• Local debt crisis: Local governments are burdened with debts exceeding 90 trillion yuan, with some regions even relying on 'borrowing new to pay old' to maintain operations. Once the economy declines, they will face the risk of fiscal collapse.

• Test of social stability: High unemployment rates, middle-class anxiety, and weak internal consumption make the country appear more vulnerable under external shocks. If internal funding chains and confidence collapse, even if not at a disadvantage in external competition, it may still suffer defeat due to 'internal strife'.

Summary: Beyond financial warfare and technological blockades, the internal economic structure and systemic contradictions within China are key factors determining victory or defeat. A rupture in internal stability could lead to a collapse under external pressure, thus losing the ability to sustain resistance.

IV. Extreme scenarios: The ultimate contest of the China-U.S. financial war

In the most extreme scenario, the U.S. may intensify its financial attack on China through the following two strategies:

Scenario one: Prohibit China from using dollar settlements

• Foreign exchange market storm: The yuan may face a sharp decline, and foreign exchange reserves could face severe depletion, leading to market panic.

• Disruption of supply for bulk commodities: Energy, food, and raw materials may be interrupted due to inability to settle in dollars, severely impacting manufacturing and industrial production.

• Corporate debt crisis: Chinese companies relying on dollar financing will face explosive growth in debt and sharply rising financing costs.

Possible countermeasures from China

1. Upgrade foreign exchange controls: Restrict capital account flows, freeze some foreign debt repayments, and do everything possible to stabilize foreign exchange reserves and exchange rates.

2. Promote digital yuan and CIPS: Build alternative settlement systems to achieve currency docking with countries in the Middle East, Africa, ASEAN, and other regions.

3. Physical settlement and resource exchange: Use resources such as rare earths and raw materials for direct exchange to avoid risks associated with dollar settlements.

4. Strategic gold reserves: Use gold and foreign exchange reserves to stabilize international confidence, serving as the last hard currency.

Scenario two: The Federal Reserve continues to raise interest rates and sanction Chinese assets

• Intensified capital outflow: A-shares and Hong Kong stocks may continue to decline due to massive outflows of foreign capital, undermining market confidence.

• Real estate market collapse: High financing costs trigger debt explosions in the real estate sector, leading to a fiscal crisis at the local level.

• Intensifying social contradictions: Rising unemployment and declining income will exacerbate social discontent, increasing domestic risks.

Possible countermeasures from China

1. National team intervenes to support the market: State-owned enterprises, social security funds, and others intervene in the stock and real estate markets to stabilize the financial system.

2. Flexible monetary policy: Moderate liquidity injection to support the market while also preventing uncontrolled inflation.

3. Build third-party financial platforms: Find ways to operate outside the dollar system through financial centers in Hong Kong, Southeast Asia, and other regions.

4. Strengthen social stability mechanisms: Enhance public opinion control and social security to ensure the basic living standards and social stability of the populace.

Ultimate viewpoint: In extreme scenarios, the U.S. can create a huge shock in the short term through financial sanctions and dollar hegemony, while whether China can 'counterattack' depends on whether it can withstand external pressure, establish a financial defense independent of the dollar system, and gradually achieve technological breakthroughs through industrial chain advantages.

V. How can ordinary people 'preserve wealth' in financial warfare?

Facing such a severe international situation, how should ordinary investors adjust their asset allocation to cope with possible financial storms? Here are a few suggestions, purely theoretical discussions, and should not be taken as specific investment advice:

1. Diversify asset allocation

• Diversified investment: Spread funds across different asset classes such as stocks, bonds, real estate, and precious metals to reduce the risk of single market fluctuations.

• Currency diversification: Allocate non-dollar assets such as euros, yen, and even some emerging market currencies to balance potential extreme fluctuations in the dollar.

2. Maintain liquidity and prevent capital controls

• Cash and short-term deposits: Reserve a certain proportion of cash assets to respond to sudden events in the financial market. But also be cautious of inflation risks.

• Attention to digital assets: In the context of the state promoting stable central bank digital currency, the digital yuan may become a safe and efficient payment tool; while cryptocurrencies, due to their volatility and regulatory risks, should be approached with caution.

3. Focus on defensive industries and domestic demand market

• Defense and technology sectors: Related companies may receive policy support amid national strategic adjustments, possessing strong risk resistance capabilities.

• Domestic consumption sector: Under the promotion of the 'internal circulation' policy, basic consumption, education, healthcare, and other sectors may be more stable, becoming pillars of future economic recovery.

4. Mindset and risk management

• Stay rational: Avoid making extreme investment decisions due to panic. Long-term planning and prudent layout are key to coping with turbulence.

• Seek professional advice: In a complex international situation, consult professional financial advisors to develop practical investment strategies based on individual risk tolerance.

VI. Conclusion

The economic and financial war between China and the U.S. is not only a game between the two countries but also a significant change affecting global economic, trade, and financial stability. The U.S. has a clear short-term advantage due to its dollar hegemony, technological blockades, and control of global capital; while China seeks survival and counterattack through its internal industrial chain, vast market, and gradual de-dollarization. However, regardless of the situation, once the situation gets out of control, the entire world will pay a heavy price.

For ordinary investors, the key lies in early layout, diversifying risks, staying rational, and closely monitoring national policies and global market trends. It remains uncertain who will ultimately emerge victorious in this war without gunpowder, but beforehand, every country and individual must prepare adequately for possible severe shocks.