Wall Street may be staring down the barrel of a long-term structural crisis—one rooted not in liquidity or regulation, but in a fundamental decoupling from the real global economy. China now commands the majority share of the world’s most dynamic and cost-efficient high-tech manufacturing sectors, excluding a handful still dominated by Western incumbents: semiconductors, precision instrumentation, and advanced industrial automation software. Mainland China’s ascendancy in these sectors has effectively locked Wall Street out of direct access to an industrial base accounting for more than 30% of global production capacity. This economic divorce has been exacerbated by successive U.S. administrations—from Trump’s sweeping trade war to Biden’s more technocratic but no less restrictive controls—culminating in a comprehensive regime of import-export constraints targeting Chinese tech.
By the end of 2024, the combined assets of publicly listed mainland Chinese firms reached $4.6 trillion, according to Statista. This figure does not capture the vast reservoir of innovation and value locked in yet-to-be-listed private firms, particularly in the SME sector, many of which are regarded as future leaders in deep tech. The valuation of these firms could easily rival, if not surpass, the assets of their publicly listed counterparts. (Source)
Federal Reserve data underscores the imbalance on the U.S. side. As of Q4 2024, total assets held by U.S. manufacturing firms stood at just $13.8 trillion—less than 10% of the $145 trillion in net assets controlled by U.S. financial institutions. (Source) While marginal gains have been made in manufacturing productivity (from $5.0 in assets per unit of output in 2021 to $4.8 in 2024), the 4% improvement over three years pales in comparison to the 41% surge in the S&P 500 index during the same period. (Source) This divergence is symptomatic of a broader structural issue: the growing detachment of U.S. capital markets from productive, asset-based industries, and their increasing dependence on financial engineering and speculative investments. (Source)
Unless Washington softens its increasingly hawkish stance on Beijing, Wall Street will remain cut off from a sizeable portion of the global industrial economy. Instead, capital will likely continue to flow into artificial intelligence infrastructure—namely, data centers and their energy support systems—serving largely the financial and digital services sectors. This narrow allocation pattern has persisted over the past three years, sustaining financial sector GDP contributions and propping up government tax receipts, even as the real economy loses ground.
For a U.S. demographic dominated by ageing baby boomers whose pension security hinges on asset appreciation, the Trump camp’s bid to “bring back” high-end manufacturing via tariffs and trade wars is economically counterintuitive. Rather than leveraging Wall Street capital to connect with and benefit from China’s comparative advantages in cost and innovation, the administration appears committed to a confrontational stance that may ultimately undermine America’s remaining industrial supply chains and market value.
Jimmy Dimon, CEO of JPMorgan Chase, returned from his bank’s annual China summit in Shanghai to find himself in a complicated domestic political landscape. Denied direct access to former President Trump to brief him on his mainland engagements—unlike the more ideologically aligned media figures such as Bill O’Reilly—Dimon took to the media circuit, including an appearance on Fox News, to deliver a more grounded assessment of U.S.–China economic dynamics. His message was threefold: first, that China remains resilient and unfazed by Trump-era trade hostilities; JPMorgan’s Chinese operations posted some of the best results globally in Q1. Second, he urged the U.S. to abandon the fantasy of reviving low-end manufacturing and instead focus resources on developing strategic capacities in advanced industries like semiconductors and AI—arguing for longer defense budget cycles to support this. Third, he dismissed the notion of investing public funds in speculative virtual assets like Bitcoin, advocating instead for essential defense stockpiling. Dimon noted pointedly that U.S. missile reserves would last barely a week in a potential South China Sea conflict—a situation he deemed intolerable. (Source)
When pressed about the Trump-aligned House’s recent passage of the “genius” stablecoin legislation, Dimon remained circumspect. While stablecoin circulation has ballooned 84% over 2024—from $125 billion to $230 billion—Dimon restricted his comments to JPMorgan’s internal use of blockchain for settlements via JPM Coin. There are, he said, no concrete plans to launch such technology to the broader public, hinting at skepticism over the long-term utility of stablecoins. This caution is hardly surprising. As both a major Federal Reserve stakeholder and CEO of America’s largest bank, Dimon is acutely aware of the competitive threat stablecoins pose to traditional deposits. He also recognizes the Trump camp’s potentially self-serving motivations: exploiting regulatory gaps to profit personally from virtual currency issuance, capturing value from the $27.6 trillion in stablecoin-facilitated transactions, and bundling stablecoins to U.S. Treasuries to open new avenues for government financing and speculative arbitrage.
The stablecoin model, if scaled to $2 trillion in circulation as HSBC projects, remains a marginal player in the context of America’s $37 trillion national debt and annual fiscal deficits of $2 trillion. Moreover, stablecoins are intrinsically linked to short-term Treasuries—maturing in under 90 days—doing little to relieve long-term government funding pressures. The issuance of these coins may also undercut the Federal Reserve’s exclusive authority to issue dollars, potentially eroding global confidence in U.S. monetary sovereignty.
Relying on stablecoins to resolve America’s mounting fiscal and capital allocation crisis, in short, is a perilous strategy—a digital elixir with all the hallmarks of a short-term fix and long-term instability.