To a high-risk speculator, the logic seems sound: borrow heavily in a currency destined to crash, convert the cash to dollars, and repay the debt later for pennies. However, for investors eyeing a potential Chinese collapse, geopolitical strategist Peter Zeihan suggests this specific brand of financial engineering is a trap.
Zeihan argues that the Chinese financial system functions less as a market and more as a political instrument designed to keep capital strictly within the mainland. Over 99% of the yuan is locked behind aggressive controls, with the small fraction traded globally moving mostly through Hong Kong markets. Even if a foreign investor managed to secure a massive loan, transferring the liquid funds to a safe harbor would be mechanically impossible.
"The money cannot leave," Zeihan notes.
If a collapse were to occur, the precedent is likely not the Soviet Union, but Venezuela. Once the wealthiest nation in the Western Hemisphere, the petro-state was "driven into the ground" by President Nicolás Maduro following the populist mismanagement of Hugo Chávez. The resulting economic disintegration triggered what Zeihan terms a "fiscal and eventually nutritional collapse."
Before its economy broke, Venezuela had poured oil profits into foreign assets, including sophisticated refineries in the United States. As Caracas lost the financial capacity to maintain these investments, they fell into receivership. The U.S. government eventually brokered the sale of these assets to third parties or independent firms, effectively stripping the original owners of their equity.
China is Venezuela writ large. Beijing has an estimated $10 trillion invested globally, roughly one-third of which consists of hard assets like infrastructure, real estate, and industrial facilities. Should the Chinese Communist Party dissolve or the central government fracture, the legal ownership of these assets would likely evaporate. Host governments would nationalize the facilities or auction them off to domestic entities, leaving international creditors with nothing.
The real profit opportunity lies not in shorting the currency, but in preparing for the void China leaves behind. As global supply chains decouple, the world will face an urgent deficit in manufacturing capacity. The smart play is to finance the factories, refineries, and transport networks outside of China that will be required to fill the gap.
While the strategy lacks the thrill of disaster speculation, building this capacity now is significantly cheaper than attempting to construct it during a crisis. "Invest in the physical infrastructure and the industrial plant that will have to replace what the Chinese are doing now," Zeihan advises.