Shadow banking, China and Turkey: Techno-imperialism in the globe (II)

Neoliberalism, the current version of capitalism, has been advancing at the "techno" level of new imperialism through various tools over the last 45 years. It is possible to link the techno-prefix to the financialization of global capitalism to an unprecedented extent in history, thanks to developments in digital technologies. The scale of this financialized imperialism can be explained by global imbalances and the destruction and massive inequality it creates across all middle and lower classes, primarily the working class.

Global imbalances over the last 20 years have once again emerged as a serious risk. In the first half of 2025, the US current account deficit reached 4.6% of its GDP, the highest level since its peak before the "2008 global financial crisis" (2006). In contrast, China's current account surplus rose to 3.5% of its national income in the first three quarters of 2025, while the Eurozone posted a current account surplus of around 2%.

The 3500-year-old Chinese civilization is still seen as a key country by both the West and the East. In this context, the China-US meeting did not result in geopolitical fragmentation, but some of the problems remain unresolved. China responded to the US offer of 150 Boeing aircraft with a request to purchase 200. On the other hand, it had to promise to purchase nearly 20 billion dollars worth of agricultural products (such as soy) from the US annually, but only stated that it would evaluate the easing of sales of critical minerals used in high-tech goods (of which it controls 90% worldwide).

China does not seem to pay much attention to the note from the G7 regarding the erosion of its current account surplus. The note suggests that if the Chinese state increases public spending again through education and health, Chinese consumption would increase, thereby (reducing savings) partially eroding the current account surplus (beneficial for everyone!).

CURRENT ACCOUNT DEFICITS ARE SPREADING

On the other hand, the number of countries running current account deficits in the financialized world is increasing rapidly (around 50). The number of countries with current account deficits is 50% higher than those with surpluses. China may erode some of its 1.2 trillion current account surplus, but it has signaled that it will not give it up entirely. The US current account deficit has also reached a historic record, hitting the 1.2 trillion level. This means that the customs tariffs implemented by the Trump administration are not working very well, or have a limited effect. In fact, mainstream economists, including a former IMF chief economist (and his colleagues), are warning the US "not to rely solely on customs duties and exchange rates." (G7 Economist Memo on Global Imbalances, Chong Enbai, G. Gopinath, A. Weber.)

As for the techno-imperialist trump cards in the hands of the US... The financialization from 1980 to the end of 2007 (the 2008 global crisis) saw an expansion led by large commercial banks. After the global crisis, the expansion process of shadow banks and central banks became effective. It is observed that techno-imperialism fully emerged during this process. This is because, on one hand, central banks like the Fed and the ECB expanded their balance sheets to inject dollars and euros into the market, and on the other hand, this massive monetary asset (around 15 trillion dollars) was operated through shadow banking activities.

Multinational and transnational corporations (TNCs) kept high-value jobs such as product development, research, and marketing at the center (in the North), while condemning suppliers in peripheral countries to labor-intensive, low-tech, low-profit-margin jobs that carry heavy currency risk. Leading firms (TNCs) impose dollar-based invoicing on their networks. Approximately half of SWIFT payments (3/5 of those outside the Eurozone) are made in dollars. When the Fed raises interest rates, the cash conversion cycles of suppliers in peripheral countries are instantly disrupted, and financing costs skyrocket. These costs could eventually jeopardize the financing of the US current account deficit.

"SHADOW BANKING" AS A FINANCING METHOD

However, in recent years, another effective method has been developed to finance the US current account deficit: "Shadow Banking." The stagnation of traditional banking, the evasion of regulations, and the growth of shadow banking are noteworthy. After the 2008 crisis, heavy regulations (such as Basel III) were imposed on traditional commercial banks. Large capital at the center (finance capital) shifted to "shadow banking" (hedge funds, private equity, money market funds), an unregulated, rule-free, and leveraged area, in order to obtain higher and faster returns against the tendency of profit rates to decline.

This type of finance began to manage assets above banking through leveraged funds, pension funds, cryptocurrencies, etc. Thus, ownership became monopolized to an enormous extent through techno-capabilities. Just like the trusts at the beginning of the 20th century... The difference can be explained by the financial power that comes with technology ownership.

Furthermore, the fluidity between money within the system and money outside the system, as well as the flow of money outside the system (discrepancy, net errors and omissions), was developed again with the possibilities of digital technology. The giant trio within the financial system, namely BlackRock, Vanguard, and State Street, owned 6% of S&P (financial) stocks in 2008, while this rate exceeded 20% in 2025.

The local financial systems of peripheral economies became deeply tied to monetary policies at the center (Fed decisions) and portfolio preferences. Large local firms in peripheral countries integrated by borrowing from international financial markets to cover the cash deficit created by exploitation in the production chain and the 60-90 day long payment terms imposed by leading companies; however, due to high interest rates and narrowing profit margins, these firms began to invest their money in high-yield local government debt securities (financial assets) instead of making productive investments. Thus, peripheral economies became shock absorbers (buffers) for the liquidity cycles of the center. Techno-imperialism, take note.

In Turkey, the chronic nature of inflation and the inadequacy of local deposit interest rates/instruments in protecting the value of money (the inflation measurement problem) forced households and companies into a "balance sheet escape." Since taking foreign currency abroad through the traditional banking system is subject to legal limits and tracking, cryptocurrencies (especially stablecoins) have become the fastest tool (shadow tool) for moving unregistered and registered capital in Turkey abroad.

"NET ERRORS AND OMISSIONS ITEM" AND ITS MEANING

It is also known by economic administrations that a significant portion of the fluctuations in the "Net Errors and Omissions" item, which shows mysterious money inflows and outflows in the Central Bank's balance of payments data, is behind this cryptocurrency/stablecoin traffic. In addition to the current account deficit reaching 39 billion dollars in the last year, the negative balance of 33 billion dollars in the net errors and omissions item is noteworthy for Turkey.

So, where do the centers of techno-imperialism, such as Tether and Nvidia (whose market value is higher than the FTSE100, CAC 40, and DAX), invest this huge monetary capital? Of course, in US Treasury bonds. Thus, the massive US current account deficit and budget deficit (totaling nearly 3 trillion dollars) are financed.

While Russia, which was left behind in the arms trade by being excluded from the Swift system, enjoys the appreciation of the Ruble with the rise in oil prices, there is a view that it would be a "complete disaster" for China to allocate resources to consumption by listening to mainstream economists. Because China is preparing for a possible techno-imperialism crisis by increasing its savings with its massive reserves on one hand, and achieving leadership in cheap and high-tech goods compatible with global climate goals by developing green technologies (electric vehicles and solar panels) on the other.

The problem here is the loss of competitiveness of monopolies in the West. According to Michael Roberts, if China implements a model entirely focused on consumption and based on the free market as recommended by the West and the IMF, and liquidates the state sector, it will fall under the yoke of the imperialist financial hierarchy. It is impossible not to agree with this, especially when considering the relationship between the current account deficit and net errors and omissions in Turkey... Germany's recent attitude on this issue, its rapid arms investment, and its effort to cut social spending are relevant. If Germany continues to make its current account surplus by using the assembly lines of its car factories for arms production (Volkswagen), it will neither be able to see this current account surplus again nor will it be able to avoid a surplus value deficit that will erode real wages. Of course, if the democratic environment allows it.

The global imbalances we have emphasized from the beginning, even if delayed somewhat thanks to China, are putting us back into the global crisis circle; there is no escape! The world will not be the same afterwards, be aware...

We will continue the analysis for Turkey..