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By Nirmal P Acharya

The world is currently in a state of turmoil, with the driving force being the clash between Eastern and Western civilizations, and the focus being the competition between China and the United States.

As the birthplace of Buddhism and Buddhist philosophy, the underlying spirit of Eastern civilization, Nepal is qualified to offer some comments on this century’s great competition.

In my personal opinion, in the game between China and the United States, the United States is bound to lose.

The hegemony of the United States can stand firm only by relying on two main pillars: the US dollar and the US military. However, the US dollar must be supported by Chinese manufacturing; meanwhile, the advanced weapons systems of the United States have a deep and short-term irreplaceable reliance on the Chinese supply chain in terms of key materials and components.

First, Made-in-China underpins the US dollar. China’s powerful manufacturing sector, through trade surpluses and capital circulation, has objectively become an important material foundation for the sustenance of the US dollar hegemony system. Its core logic lies in the cycle of commodities, US dollars, and capital.

1. Exchange of commodities and US dollars

As the “world factory”, China exports large quantities of high-quality and low-cost goods to the United States, accumulating massive US dollar trade surpluses.

2. Capital reflux

To acquire relatively safe assets, China channels most of its earned US dollars back to the US by purchasing US Treasury bonds and other assets, financing America’s fiscal deficits.

3. Inflation mitigation and consumption support

Cheap goods made in China have effectively suppressed inflation in the United States, allowing the US to maintain loose monetary policies and a high-consumption model while keeping inflation low.

Through this cycle, Made-in-China not only meets America’s material needs but also supports the liquidity and credibility of the US dollar at the financial level. According to a research report by the Chinese University of Hong Kong, imports from China have helped reduce the US core inflation rate by an annual average of 1.3 percentage points since 1994, saving US consumers about $623 billion per year.

US dollar hegemony is not determined unilaterally by the United States, but deeply depends on the cycle of the global real economy, especially the participation of Made-in-China.

After the US dollar decoupled from gold, its value mainly relies on US national credit and global “usage inertia”. As the core hub of the global supply chain, China’s huge manufacturing output (accounting for 30% of the world’s total) and complete industrial chain provide solid material support for the US dollar’s dominant position in trade settlement. Fundamentally, the world needs US dollars because it needs to purchase global goods represented by Made-in-China.

As a reserve currency country, the US must maintain trade deficits to supply US dollars to the world, but this in turn weakens its manufacturing sector. The high efficiency and low prices of Made-in-China allow the US to sustain long-term trade deficits without runaway domestic inflation, temporarily easing the fundamental contradiction between maintaining dollar hegemony and the decline of domestic manufacturing. As scholars have noted, dollar hegemony leads to an overvalued dollar, which undermines the competitiveness of US manufacturing—and the existence of Made-in-China buffers the impact of this negative effect.

However, the role of Made-in-China in supporting the US dollar is not static. As China upgrades its industries and promotes RMB internationalization, this “support” is shifting to “weakening”. China’s global leading position in high-end manufacturing such as new energy, new energy vehicles, and photovoltaics (with a global market share of over 60%) is creating new demand for international trade and settlement, directly challenging the dollar’s monopoly in settlement.

There is a serious mismatch between China’s huge economic size (about 18% of the global total) and the international status of the RMB (only about 2.4% of global reserves). This mismatch drives China to accelerate RMB internationalization, including building a cross-border RMB payment system, conducting local currency settlement with multiple countries, and promoting the RMB’s pricing function in bulk commodities. This shows that China is actively seeking to reduce its excessive dependence on the US dollar.

The international monetary landscape is undergoing major changes. The US abuse of financial sanctions and the Federal Reserve’s aggressive interest rate hikes are continuously eroding the credit foundation of the US dollar. Meanwhile, a global “de-dollarization” wave is emerging, and central banks are increasingly demanding a diversified international monetary system. Industrial achievements such as China becoming the world’s largest automobile exporter (with sales exceeding 27 million units) are building trust in the RMB on the real economy of “making quality goods”, forming a new “industry‑currency” cycle different from the “petrodollar”.

Today, Made-in-China is shifting from a passive “supporter” of the dollar system to an active “shaper” in the multipolarization of the international monetary system.

Its strong production capacity was once the “stabilizer” of US dollar hegemony, and is now becoming the “propeller” of the RMB’s rise. Its ultimate role will be determined by the future reshaping of the global economic and financial order.

Now let’s look at U.S. advanced weapons systems’ dependence on China. The U.S. defense industrial base has a structural weakness: its advanced weapons systems rely deeply and irreplaceably in the short term on Chinese supply chains for critical materials and components.

1. The dependence is structural: it involves not just components, but the entire industrial base. This reliance exists at multiple levels of the supply chain:

At the prime contractor level: In 2024, Chinese enterprises accounted for about 9.3% of prime contractors in major U.S. Department of Defense programs across nine critical areas, reaching as high as 11.1% in missile defense.

At the critical minerals and raw materials level: This is a more fatal “deep dependency.” Govini, a U.S. defense procurement firm, found that due to China’s dominant position in the global supply of refined materials such as gallium, germanium, antimony, and tungsten, nearly 78% of U.S. weapons systems—covering more than 1,900 systems—are affected by China’s export controls on critical minerals.

At the specific component level: Taking batteries as an example, about 6,000 battery components used in current U.S. military weapons programs depend on Chinese supply chains.

2. Why would a supply cutoff be fatal? If China cut supplies, the impact would go far beyond “missing parts”—it would inflict hemorrhagic shock on the entire production system:

Production shutdown: The manufacturing of high-end equipment such as the F-35 fighter jet and Patriot missiles relies heavily on permanent magnets, electronic components, and energy storage devices using Chinese raw materials. A supply cutoff could halt assembly lines.

Cost spiraling: Finding alternative suppliers would involve huge certification costs and time delays. Analysts estimate it would take the U.S. at least five years to build a domestic battery supply chain independent of China.

Investment death spiral: More subtly, China has not resorted to simple “cutoffs,” but adopted targeted export controls. This “tightening-only” strategy creates unstable market expectations, discouraging private capital from investing in alternative capacity—since China could reopen supplies at any time to drive down prices—thus strategically discouraging the U.S. from rebuilding domestic production.

3. The U.S. dilemma: aware but unable to break free quickly. Top U.S. officials are fully aware of the problem, yet reforms remain slow and difficult.

Officially acknowledged risks: A 2025 report by the U.S. Government Accountability Office (GAO) clearly identified DoD’s reliance on foreign suppliers as a “national security risk,” while existing procurement data systems “lack visibility” into raw material sources at the lower levels of the supply chain.

The decoupling paradox: Although the U.S. has pushed for decoupling from Chinese military-related companies through the National Defense Authorization Act, Pentagon officials have acknowledged that violations are widespread in lower-tier supply chains, and fully removing Chinese suppliers may be unrealistic.

4. Overall assessment: Is this a strategic trump card? From a game-theory perspective, the core lies in asymmetric power. China is not merely a supplier, but a monopolist in global processing capacity for critical refined materials. This makes a supply cutoff not just a commercial penalty, but a strategic deterrent.

As analysts note, China does not need a full embargo. Through targeted adjustments such as licensing and environmental reviews—what can be called “drip-feed” controls—it can keep U.S. manufacturers trapped in prolonged supply anxiety and inventory chaos, while dampening their political will and capital investment to rebuild alternative capacity. A supply cutoff would create for China the strategic possibility of “subduing the enemy without fighting.”

Therefore, in the competition between China and the United States, I personally believe that China will win. China’s victory represents the triumph of Eastern civilization, which is somewhat equivalent to the victory of Nepal, as Nepal created Eastern civilization and belongs to it.