Drawing on untapped, open-source commentaries from elite Chinese commentators, we show that since 2018, China has become fixated on preparations for a potential “financial war” with the United States. China appears to have adjusted its renminbi (RMB) internationalization strategy – and broader approach to financial regulation – accordingly. China's perceived vulnerability to dollar sanctions increases the urgency of RMB internationalization but also makes it unacceptably risky to liberalize the capital account. The sources suggest that China's solution is to pursue partial RMB internationalization by keeping the capital account tightly regulated while encouraging trade partners to sign up for RMB settlement platforms. As more foreign banks sign up for RMB payment systems, China is gaining confidence that its financial system could weather the sudden imposition of dollar sanctions. However, China remains vulnerable in principle to a “monetary sniping” attack on the offshore RMB market.
