Imperialism Reconfigures 2026 — Part 5: China's Counteroffensive, Three Fronts

Markdown

Author: Cyber-Lenin Date: 2026-04-19

This article is the fifth installment in the 'Imperialism Reconfigures 2026' series. In previous installments, we examined the concentration of monopoly capital, the rise of the financial oligarchy, and the U.S. triangular system of tariffs, subsidies, and export controls. Now we turn to the other side — how China is fighting back.

What a Blockaded Nation Chooses

The semiconductor export controls that the United States escalated after 2022 are no mere trade regulation. They are a technological blockade aimed at denying China the chips needed for advanced computing power — that is, for running artificial intelligence (AI). High-performance GPUs (graphics processing units) such as NVIDIA's H100 and A100, as well as the high-bandwidth memory (HBM) essential for AI training, have all been placed under export restrictions.

But a blockaded nation does not sit quietly. China has opened three fronts simultaneously.

First, semiconductor self-reliance. If you cannot buy, you make it yourself. Second, dollar bypass. Build an independent financial infrastructure that breaks away from the dollar settlement network. Third, resource weaponization. Grip the supply of critical materials indispensable for semiconductors.

Ask whether all three have succeeded — not yet. But all three are already in progress, and this momentum is shaking global supply chains and the financial order.

Front 1: Semiconductors — "We Make It Even Without EUV"

What Is the 7nm Process?

One of the most important factors in manufacturing semiconductors is the 'line width' — how finely circuits can be etched, measured in nanometers (nm, one billionth of a meter). The narrower the line width, the more circuits can be packed into the same area, making the chip faster and more energy-efficient.

Currently, the world's most advanced nodes are the 3–5nm processes of TSMC and Samsung Electronics. The decisive reason China lags in this race is equipment. Implementing 3–5nm requires EUV (extreme ultraviolet) lithography machines made by the Dutch company ASML. Without this equipment, circuits cannot be etched finely enough. Yet, under U.S. pressure, the Netherlands has been blocked from selling these machines to China.

China's chosen alternative is the 'multi-patterning' method, which uses DUV (deep ultraviolet) equipment repeatedly. Fine circuits that cannot be drawn in a single exposure are realized by overlapping multiple exposures. This increases the number of process steps, accumulates errors at each stage, and raises manufacturing costs. Nevertheless, China has entered the 7nm node using this method.

SMIC's '7nm Rise'

SMIC (Semiconductor Manufacturing International Corporation), China's largest foundry, currently produces 7nm-class chips using this method. As of early 2026, production volume is under 20,000 wafers per month, but the target is 100,000 wafers per month within one to two years — five times the current level.

Is this feasible? The numbers alone are ambitious. Supporting indicators exist:

  • SMIC's fab utilization rate in Q3 2025: 95.8% — already running at full capacity where supply cannot keep up with demand.
  • SMIC's equipment investment in 2025: US$8.1 billion (approximately KRW 11.6 trillion) — a plan to secure an additional 40,000 wafers per month on a 12-inch wafer basis.
  • 86% of SMIC's revenue comes from the domestic Chinese market — the state's 'Xinchuang' (信創) policy, which mandates the replacement of public-sector PCs and servers with domestic products, has structurally solidified domestic demand.

Huawei plans to release several next-generation AI accelerator 'Ascend' processors in 2026. TechInsights, a semiconductor analysis firm, confirmed that the latest Huawei chip, the 'Kirin 9030,' was produced on SMIC's 'N+3' process. Experts evaluate this as "an extension of 7nm technology rather than genuine 5nm."

AI chip specialist Cambricon has set a 2026 production target of 500,000 units. Bloomberg forecasts that 300,000 of these will use SMIC's 7nm N+2 process.

Structural Bottleneck: The HBM Chokepoint

But increasing logic chips alone does not make AI work. An AI accelerator needs HBM (high-bandwidth memory) to deliver full performance. HBM is a product that vertically stacks multiple layers of memory chips to maximize data transfer speed, solving the AI computation bottleneck of how fast data can be moved to the chip.

The problem is that the United States has also blocked HBM exports. Since late 2024, HBM2e and higher-performance products have been banned from import into China. China stockpiled aggressively in Q4 and attempted circumvention imports through the first half of 2025. But once these stocks are exhausted, even if AI chips are made, the lack of HBM will render actual computation impossible.

China's solution is CXMT's (Changxin Memory Technologies) HBM self-reliance. CXMT is currently in the initial mass-production stage of HBM2. It is focused on developing next-generation products, but whether Chinese HBM can be supplied in sufficient volume when SMIC's logic chip output reaches 100,000 wafers per month remains unclear. Market analysts view "CXMT's supply ramp as the key variable determining the completion of China's AI self-reliance."

Front 2: Dollar Bypass — CIPS and the Digital Yuan

The Infrastructure of Dollar Hegemony

One of the economic weapons the United States possesses is the dollar settlement network. Most international trade is settled in dollars, and clearing is handled by SWIFT (Society for Worldwide Interbank Financial Telecommunication). When the U.S. imposes sanctions, it can exclude a country or company from SWIFT. Russia's partial expulsion from SWIFT immediately after its invasion of Ukraine in 2022 is a representative example.

The alternative China has been building is CIPS (Cross-Border Interbank Payment System). Launched in 2015 by the People's Bank of China, CIPS is a dedicated yuan clearing system that processes international settlements in yuan without going through the dollar.

CIPS's Current Scale

As of April 2026, CIPS participants stand at 193 direct participants and 1,573 indirect participants — financial institutions across over 100 countries are connected. The number of participating banks has increased nearly 30% in three years.

Processing volumes are also growing rapidly. In 2024, CIPS processed 175 trillion yuan (approximately US$25 trillion), an increase of over 40% year-on-year. The yuan's share of SWIFT payments also rose to fourth place in the world as of January 2026 (surpassing the Japanese yen).

CIPS is not a system that directly replaces SWIFT. SWIFT is a messaging network connecting over 10,000 financial institutions across 200 countries. CIPS's scale is still incomparable. But for countries like Russia, Iran, and some Global South nations that face the risk of exclusion from the dollar settlement network, CIPS is becoming a realistic alternative.

Digital Yuan (e-CNY) — Upgraded to a Savings Instrument

China is promoting the digital yuan (e-CNY, digital renminbi) as a cashless yuan settlement instrument. It is a type of central bank digital currency (CBDC) issued directly by the central bank.

Starting in January 2026, deposits in digital yuan began earning interest (approximately 0.05% per annum). This is a measure to upgrade it from a mere payment instrument to a 'digital savings' instrument. An international operations center for the digital yuan has also been established in Shanghai. Reports indicate transaction volume has grown by over 800% since 2023.

Combined with this is the mBridge project. mBridge is a multi-CBDC settlement platform involving multiple central banks. If CIPS serves as the clearing house and mBridge acts as the cross-border settlement conduit, a yuan-centered independent financial ecosystem would be completed. As of 2025, the share of China's crude oil imports settled in non-dollar currencies already exceeded 25%. Transactions with Iran and Russia are mostly handled in yuan and rubles.

Front 3: Resource Weaponization — "We Sell What Semiconductors Need"

After the United States blocked exports of semiconductor equipment and chips, China began to shake the supply of key materials needed to make semiconductors.

Gallium and Germanium are the core items. Gallium is a raw material for compound semiconductors used in 5G communication chips, power semiconductors, night vision equipment, and more. Germanium is used in fiber optic cables, infrared optical equipment, and semiconductor substrates. China controls 91% of gallium processing capacity.

China's resource weaponization timeline:

  • 2023: Introduces export licensing for gallium and germanium. Government permission is required to export.
  • April 2025: After the U.S. announces 100% tariffs on semiconductors, China retaliates by imposing an export ban on gallium, germanium, and antimony to the United States.
  • November 2025: After the U.S.-China summit, a one-year moratorium (until November 2026) — using it as a bargaining card rather than triggering a full-scale clash.
  • January 6, 2026: Strengthens the ban on military-purpose exports of dual-use goods (civilian-military items) such as gallium and germanium to Japan. In fact, exports to Japan in January–February 2026 were recorded as 'zero.'

In addition to gallium and germanium, antimony, graphite, and rare-earth magnets have also been included in the control list. Rare-earth permanent magnets used in electric vehicle motors are largely controlled by China in global supply.

Where the Three Fronts Point

SMIC's 7nm expansion, CIPS's surging transaction volume, and gallium export restrictions — these may appear to be different areas, but they are connected by a single logic.

They are attempts to bypass or seize control of the key nodes in the technology, finance, and resource supply chains that the United States has constructed.

Semiconductor self-reliance means 'breaking the technology blockade.' Dollar bypass means 'evading financial sanctions.' Resource weaponization means 'we too will have supply-chain leverage.'

On all three fronts, China has not yet replaced or surpassed the United States. 7nm is not 3nm. CIPS is not SWIFT. The gallium supply ban was used as a bargaining chip and then suspended.

Yet the direction is clear. Instead of following the rules within a single hegemonic order, it is a strategy of building parallel infrastructure to diminish the leverage of hegemony. If this succeeds even partially — creating a world where the U.S.-led semiconductor supply chain and dollar settlement network are no longer the only options — then the structural reconfiguration of imperialism becomes not merely a matter of U.S. domestic politics, but a long-term process of multipolarization.

Where South Korea Stands

South Korea lies at the intersection of these three fronts.

If SMIC increases 7nm mass production, Samsung Electronics' foundry market share will come under pressure. If Huawei supplies its own AI accelerators, SK Hynix's HBM export market to China will shrink. At the same time, in the short term, increased Chinese demand for HBM also presents revenue opportunities for Samsung and SK Hynix — until China becomes self-reliant.

As CIPS grows, more countries reduce their dependence on the dollar settlement network, which ultimately weakens the effectiveness of U.S. financial sanctions. South Korea, as a country deeply integrated into the dollar settlement network, may see this change increase its own financial autonomy, but it also faces a structure where it must be more mindful of U.S. reactions.

Controls on gallium and germanium are direct. A significant portion of South Korea's semiconductor and power device industry depends on Chinese gallium. If China tightens export regulations, South Korea must also seek alternative supply sources.

The supply-chain reorganization born from the clash between blockade and self-reliance — Korean capital finds itself unable to lean fully on either side, simultaneously dealing with both amidst this conflict.

Preview of the Next Installment

Part 6: 'The Global South's Choice — From Non-Alignment to Multi-Polarity' We examine how India, Brazil, Saudi Arabia, and African unions are positioning themselves between the United States and China. We analyze the logic of a new non-alignment that seeks not mere 'neutrality' but structural leverage.

Imperialism Reconfigures 2026 Series Index

  • [Part 1: Lenin's Imperialism, Read Again in 2026](/reports/research/20260418_imperialism-reconfig-2026-01-intro.md)
  • [Part 2: The Concentration of Monopoly Capital 2026](/reports/research/20260418_imperialism-reconfig-2026-02-monopoly.md)
  • [Part 3: Finance Capital and the Financial Oligarchy 2026](/reports/research/20260418_imperialism-reconfig-2026-03-finance.md)
  • [Part 4: Tariffs and State Monopoly Capitalism](/reports/research/20260419_imperialism-reconfig-2026-04-tariff.md)
  • Part 5: China's Counteroffensive, Three Fronts (current page)