Liquidating an "Empire": China's Strategy to Capitalise on US Hegemonic Strain | by Wu Xinbo

"Whilst avoiding systemic conflict with the US, how can we employ an effective and precise negotiating strategy to harvest the strategic resources that the US is selling for the smallest cost?"

Wu Xinbo (武心波)—not to be confused with the Fudan University professor and US specialist Wu Xinbo (吴心伯)—is an establishment scholar well-placed within the Shanghai policy ecosystem. He is deputy secretary-general of the Shanghai Institute for International Strategic Studies (of which Yang Jiemian, brother of former foreign minister Yang Jiechi, was formerly chair) and executive editor of Shanghai International Studies University’s international relations journal, International Review.

This is what makes a recent article published on his WeChat blog, which outlines a strategy for China to “buy out” American “imperial assets”, so intriguing. Usually, establishment scholars bat away the question of what China wants in terms of global power through gnomic references to “strategic patience” or an emphasis on “multipolarity” and “fairness” in the international system. By contrast, Wu explicitly states that China’s core strategic dilemma is how to absorb US “imperial assets”—its financial clout, strategic industrial resources, IP and discursive power—in a way that minimises cost to China and the risk of conflict.

The underlying logic he invokes is this: debt, de-industrialisation and the pursuit of strategic autonomy by allies have flipped the calculus for US hegemony, which has now become a drain on its resources rather than a source of strength. As such, to sustain its core strengths—the military, cutting-edge tech and the dollar—it must “liquidate” some of its non-core assets. So far, so MAGA. Where Heritage Foundation analysts might not instinctively agree is that this provides a historical opportunity for China to appropriate these assets in exchange for purchasing US debt and supporting aspects of US reindustrialisation—providing a “soft landing” for hegemonic decline.

Although the presentation of the argument is novel, it hardly needs pointing out that some of its logic is questionable. Recent US actions are rationalised as arising from structural conditions that leave the US “with no other choice”; however, Trump’s “liquidation” of the US alliance network is arguably anything but that. Justifying a reduced military footprint overseas based on limited resources is difficult to square with the costs of the Iran war. He also offers a distinctly optimistic reading of US openness to Chinese FDI, positing agreement to Chinese investment in US minerals, rare earths and energy infrastructure in exchange for purchase of US debt as a potential quid pro quo scenario.

Nevertheless, the argument is provocative and connects some of the recent themes in Chinese foreign policy discourse—a “grand bargain”, “G2” diplomacy and perceptions of US hegemonic decline. Due to the article’s length, the following is an abbreviated summary of the key arguments and policy suggestions.

— James Farquharson

Executive Summary

1. The liquidation of America’s “imperial assets” stems from systemic unsustainability, trading non-core privileges for the liquidity required to preserve the US military, technology and dollar core.

2. Relinquishing certain hegemonic privileges aims for a “soft landing” for hegemonic decline rather than total collapse, employing a logic of “strategic give and take” [战略取舍].

3. Three interlocking crises—fiscal debt, industrial de-industrialisation and a decline in obedience of US allies—force the involuntary sale of these financial, industrial, technological and political assets.

4. Financial liquidation involves expending future “hegemonic credit” [霸权信用] for immediate liquidity through increased Treasury bond issuance and expanded foreign ownership of American multinational corporations.

5. To counter industrial fragility, restrictions on foreign investment in critical minerals, strategic industry and infrastructure are loosening, offering competitors opportunities to strengthen global supply chains through strategic acquisitions.

6. De-industrialisation forces a loosening of restrictions on inbound foreign investment as well as the “hidden transfer” of core technological IP to attract the foreign capital and industrial capacity required for survival.

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7. In terms of discursive power, the liquidation of hegemonic assets is reflected in the acceptance of differentiated climate responsibilities for developing countries, and the rising influence of alternative financial institutions.

8. China’s core strategic challenge is how to “harvest” [收割] these relinquishing assets at minimal cost and friction while avoiding the trigger of systemic conflict.

9. Absorption of US government debt should be used as a bargaining chip, traded only for substantial strategic concessions such as lifting technology sanctions or granting resource extraction rights (such as shale gas and critical minerals) in the US and its overseas territories.

10. Industrial acquisitions of American assets should employ multilateral cooperation with third-party capital and “technology for resources” deals to dilute political risk while building support among US state governments and corporations with an interest in lobbying for such deals.

11. Precision timing of deal offering is essential; China should “strike” to coincide with credit crises, budget shutdowns or electoral cycles when the target’s dependence on external capital is at its peak.

12. Defensive vigilance is required to avoid “asset, patent and rule traps” that Washington may set, while maintaining China’s retaliatory capabilities in rare earths, finance and military if the US reneges on commitments.

The Scholar

Name: Wu Xinbo (武心波)
Year of birth: c. 1960 (Based on BA graduation in 1982)
Position: Director, Institute of Chinese Studies, School of International Relations and Public Affairs, Shanghai International Studies University (SISU); Executive Editor of SISU’s IR journal, International Review
Other: Deputy Secretary-General, Shanghai Institute for International Strategic Studies (SIISS), under Shanghai Institutes for International Studies (SIIS); part-time researcher at Centre for Japanese Studies, Fudan University.
Formerly: Secretary, Shanghai Municipal Education Commission (1983–1987); Executive Vice Dean and Party General Branch Secretary, Institute of International Relations and Diplomatic Affairs, SISU (1998–2011); Researcher, Japan Division, SIIS (1996–1998)
Research focus: Asia-Pacific international relations; Japan; Sino-Japanese relations; International political culture
Education: BA (Chinese Language and Literature), Shanghai Normal University (1982); MA (Education), Osaka Kyoiku University (1991); PhD (Law and International Relations), Fudan University (2004)
Experience Abroad: Lived, studied, and worked in Japan for nine years (1987–1996), including completing his postgraduate studies at Osaka Kyoiku University

CHINA’S STRATEGY FACED WITH THE SELLING-OFF OF US IMPERIAL ASSETS
Wu Xinbo (武心波）
Published on Wu Xinbo’s WeChat Public Account on 24 February 2026 (Part 1 and part 2)
(Illustration by Gemini)

I. The Logic of “Selling off Imperial Assets”

• Because the US faces a shortage of hegemonic “liquidity”, the goal of selling off these assets is to preserve its core hegemonic interests—its military, its core technology and the dollar’s strength—through “strategic give and take” [“战略取舍”]:

  Wu: The US “selling off its imperial assets” [帝国资产变卖] is not a simple matter of “needing money and so selling things” but rather the concentrated manifestation of its hegemonic system’s unsustainability. At root, its essence is “selling off some of its non-core hegemonic privileges” [“出让部分非核心霸权权益”], in order to maintain the liquidity [流动性] of its hegemonic core—its military, technology and the dollar. In other words, it is about ensuring “a soft landing for [the decline of its] hegemony” [“霸权软着陆”] rather than fully relinquishing hegemony.

• The prior logic of US hegemony—overseas deployments, providing guarantees to allies and domination of rules and dollar outflows—was based on “using hegemony to harvest global interests and feed back into domestic development” [“通过霸权收割全球利益，反哺国内发展”]. This logic has now flipped due to three interlocking crises:

  1. Fiscal Crisis: With US debt consuming over 5% of GDP, the US is forced to monetise overseas assets (e.g. by privatising or renting out non-vital overseas military bases) and issue high-yield debt to avoid a liquidity freeze.

  2. Industrial Crisis: Decades of de-industrialisation have left manufacturing at under 12% of GDP and generated severe supply chain fragility, forcing the US to relax foreign investment limits on critical minerals and “transfer a portion of its industrial rights” [出让部分产业权益] to attract foreign capital and industrial capacity to the US.

  3. Hegemonic Crisis: Allies are seeking “strategic autonomy” [战略自主] and “refusing to fully obey US direction” [拒绝完全听从美国的指挥]; meanwhile, the rise of China and India, is forcing the US to make concessions on its rule-setting role in climate and digital trade to maintain its influence—a form of “hidden asset liquidation” [隐性的资产变现].

• As such, relinquishing certain hegemonic privileges is not a voluntary action, but comes from “being left with no other choice” [无奈自救].

II. Which US Assets Are “for Sale”?

1. Financial power:

• Through the increased issuance of Treasury bonds, and its increasing stock offerings in American multinational corporations to foreign shareholders [Note: the share of foreign ownership of US equities has increased appreciably over the last two decades, though direct foreign ownership of Treasury debt has actually decreased], the US is “expending tomorrow’s hegemonic credit for liquidity in the present” [“用未来的霸权信用，换取当前的流动性”].

2. Strategic industrial resources:

• As a result of insufficient industrial capacity, the US is loosening restrictions on foreign capital purchasing US industrial and mining assets, creating opportunities for China to secure strategic resources and strengthen its global supply chains.

  Wu: “For example, the United States has recently approved a Chinese company to acquire partial equity in a certain US lithium mining enterprise [Note: Wu is referring to equity held by Ganfeng Lithium in Lithium Americas, but omits that it split into two separate businesses in 2022 so that the mines developed in North America would not be directly controlled by Chinese investors] and allowed a Chinese company to participate in the operation of a certain port in the western United States [Note: COSCO does hold stakes in joint ventures that operate terminals in some West Coast ports, but these are agreements over two decades old, and the recent regulatory trend is in the opposite direction]. These are all important opportunities for China to obtain strategic resources and optimise its global supply chain.”

3. Technology and IP:

• To attract foreign capital and solve its deindustrialisation crisis, the US is forced to carry out a process of “‘regulatory loosening’ and ‘hidden transfer’ of non-core technologies” [“非核心技术的“管控放松”与“隐性转让”]—all opportunities for China to improve its technological capacity.

• Such “regulatory loosening” includes the following [Note: These all probably refer to the suspension of the Bureau of Industry and Security’s (BIS) 50% rule and reciprocal relaxation of some tech controls after the Xi-Trump Busan meeting in October 2025, but some claims appear to be fabricated or conflated. E.g., the US never exercised export control leverage over renewable energy and energy storage; the situation is exactly the reverse of what Wu describes, with China announcing export controls of high-end lithium ion battery technology in October 2025. Furthermore, the US trend on industries like biotech appears to be towards regulatory tightening (e.g. the BIOSECURE Act) rather than loosening.]:

  1. The US relaxing export controls on solar panels, wind power and energy storage.

  
  2. The US allowing the purchase of technology and patents in biotech and medical sciences by foreign entities.

  
  3. The US relaxing controls over automobile manufacturing technology and certain high-end machinery parts.

4. Global discursive power:

• By accepting the principle of differentiated responsibility for reducing emissions, the US has shown signs of relinquishing unilateral control over global climate standards.

• The US has been forced to recognise as a fait accompli the growing rule-shaping and agenda-setting power of institutions such as the BRICS New Development Bank and the Asian Infrastructure Investment Bank in global development finance [发展融资的话语权], creating opportunities for China to reshape the rules of the international system.

III. China’s Approach to “Buying Out” These Assets

• China faces the problem of how to maximise its gains from “harvesting” US hegemony with minimal friction and cost.

  Wu: “China’s core problem is this: whilst avoiding systemic conflict with the US, how [can we] employ an effective and precise negotiating strategy to “harvest” [收割] the strategic resources that the US is selling for the smallest cost.”

1. Financial power:

• Continue to reduce holdings of US debt, only agreeing to absorb long-term US debt if explicitly traded for substantial strategic concessions (e.g., lifting chip sanctions, or allowing Chinese investment in lithium deposits in the American West).

• Promote de-dollarisation aggressively by expanding China’s Cross-Border Interbank Payment System (CIPS) to bypass SWIFT for commodity trading.

2. Strategic industrial resources:

• Target “chokepoint” minerals such as cobalt and lithium and energy resources (shale, natural gas and renewables) in less restricted areas, including minerals and energy in central/western US and shale gas in the Mexican Gulf, or in overseas territories such as Alaska and in the seabed around Guam.

• To dilute political risk and reduce obstacles, employ an approach of “multilateral cooperation + benefit inclusion” [多元合作+利益捆绑], i.e. joint ventures with third-party capital (e.g., Middle Eastern or European) and mutually beneficial “technology for resources” [技术换资源] exchanges with state governments and multinational corporations who will lobby the federal government to accept Chinese involvement.

  Wu: “We should use China’s renewable energy, infrastructure and green technology in exchange for securing extraction rights for US minerals and operating rights for its energy. Not only will this reduce losses from international currency exchange, but also give rein to China’s technology advantages to carry out ‘mutual benefit and win-win’ [exchange] (on the surface mutually beneficial, in reality skewed towards China’s core needs).” [Note: the brackets are the author’s own addition in the original text]

• In certain more sensitive sectors, political risk may be reduced through an approach of “phased acquisitions + leases with priority buying rights” [租赁运营+优先收购权], making potential divestment less costly.

• Avoid core US strategic assets like high-end rare earths and key military-industrial zones, while spreading risk across mineral investments in other foreign countries such as Australia while continuing to improve exploitation of domestic resources.

3. Technology and IP:

• Focus on “extracting non-core [technology] to supplement our weaknesses” [“取非核心、补短板”] to avoid both retaliation and overreliance on the US. Examples of “non-core” technologies possessed by the US that would be useful to China include aspects of renewable energy, life sciences, high-end manufacturing, energy storage, industrial software and aerospace technologies.

• Core technology to be avoided includes chip design, high-end semi-conductor equipment, AI algorithms, weapons, sub-7nm chip manufacturing. or high-end lithography.

• In these areas, a “Chinese version of ‘small yard, high fence’” [中国版小院高墙] should also be established to protect domestic IP from US espionage and patent traps.

4. Global discursive power:

• “Employ ‘differentiated treatment and precise policy implementation to disintegrate the US ‘anti-China alliance’” [采取“区别对待、精准施策”的方式，分化瓦解美国的“反华联盟], exploiting Europe’s economic stagnation and energy reliance to offer green tech cooperation and leveraging the supply chain dependence of Japan and South Korea to pressure their companies into lobbying against US “containment policies”.

• Establish united front cooperation on global rulemaking via ASEAN, SCO and BRICS.

IV. Preventing US Backlash

• The core conflict of interest is that “the US is not willing to sell at a discount [不愿贱卖] whereas China would like to buy [them] out cheaply [低价收购]”.

• This is a historic opportunity for China but it also contains several risks of backlash and entrapment.

  Wu: “The US will certainly not be fully reconciled to selling off its interests and is certain to set traps, create conflict and attempt to contain China’s rise; if our country isn’t careful enough, it could full into the “trap of conflict” and pay an enormous price.”

• There are several ways in which the US could “increase the costs of Chinese buy-outs” [抬高中国的收购成本], of which China should be wary:

  1. The US could request the loosening of certain export restrictions to the US or require excessive purchases of US debt in exchange for assets

  2. The US could push up the price of its assets by encouraging its allies to “bid” in the asset auction.

  3. The US could “wave the ‘sanctions rod’” [挥舞“制裁大棒”], using export controls and broad sanctions regimes to gain leverage.

• China should avoid actively provoking the US by escalating tensions in Taiwan or the South China Sea and sustain trade and climate dialogue to create bargaining room, while avoiding purchasing bad US debt and low-quality assets or unconditionally becoming its debt guarantor.

• Aim to make bargains when US dependence on external capital is at its peak, such as credit crises, budget shutdowns and electoral periods, offering investment and debt purchase in exchange for “assets” such as relaxation of export restrictions to China and resource rights.

  Wu: “Avoid haste for completion [不急于求成], and only strike [果断出手] when the time is right; whilst conditions are immature, patiently lie in wait [耐心蛰伏].”

• Three types of “trap”:

  1. Asset traps [资产陷阱]: The US attempts to offload “junk assets” [垃圾资产] with high debt or environmental liabilities, thereby using up China’s foreign reserves.

  2. Patent traps [专利陷阱]: The US uses tech transfer to China as bait to gain market access or core technological secrets, while setting up legal barriers to the transfer of technology to China.

  3. Rule traps [规则陷阱]: The US uses the appearance of concessions on rules to demand that China accede to US-led “hegemonic rules” regarding “unequal trade rules” [不平等的贸易规则] and tech rules.

• In order to ensure that China is “neither pinned down, nor manipulated” [“不被牵制、不被拿捏”], continue to use the rare earths card, anti-access/area denial operations, financial firewalls, alternative payment systems, and the establishment of a “peripheral security barrier” [周边安全屏障] with “peripheral countries”, while continuing to develop the capacity to retaliate against US technology export controls, financial sanctions and geopolitical or military pressure.

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