2.3 What problem is ChinaAI solving?

USD illiquidity in the Global South

Over $5 trillion in regulatory capital is trapped within BRICS' banks due to Basel's capital charges. The false narrative is that the Global South faces a dollar shortage. This is a half truth; in reality there is more than enough USD to cover the alleged deficit — the root cause of 'dollar illiquidity' is the prohibitive regulatory capital regime (and its associated capital charges and governance restrictions on equity) that block authorised dealers from utilising their existing USD surplus. ChinaAI addresses the root problem. We may break this down into 2 branches as follows.

1. Mispriced Capital Charges: Basel's regulatory frameworks impose blanket capital charges on bank-intermediated credit, which significantly increases the cost of capital distribution. For example, Trade Receivables are subjected to charges of 8%-20%, despite historically low default rates (0.02% on average). Such excessive charges have induced a $2.5 trillion trade finance gap worldwide ($1 trillion in Asia and $250 billion in Africa). This systemic issue leads us to ask: "How can we unlock unproductive regulatory capital inside banks to enable affordable credit for households, businesses, and exporters alike?"

2. BIS Governance Criteria: Post-2008 reforms compel banks to separate credit origination from underwriting via 'significant risk transfer' to third-party SPVs. Governance structures, therefore, must satisfy technical compliance while still providing oversight over risk management. The question becomes: "How can we structure a governance mechanism that is both compliant and censorship-resistant at scale?"