I agree that if the US puts sanctions on all Chinese banks, companies, which is a nuclear option, would probably accelerate the decline of the US dollar as global currency.
However the key word is ALL. If the US only puts sanctions on Huawei, that will have close to zero impact on the dominance of the USD, Lets be real here, China's historical growth has always depended on a certain extent to access to foreign markets, financial institutions, foreign technology, etc.
If we lose access to those things, it is unlikely we can maintain a 6% growth rate or even a growth at all. Technology development will probably slow down as well. If companies realize that it may not be worth investing in R&D, if it puts them in the target of US sanctions, vis-a-vis Huawei.
So to say that we will be 4x the us market in the future or whatever projections, is pretty dumb thing to say, because we won't be able to get to 4x the US market size, if China is being constantly hobbled by US sanctions.
That is analytically incorrect.
Rationale below.
a) For example, China consumers buy more smartphones and electronics than the rest of the Western World combined.
b) So China technology companies WILL invest in whatever R&D spending is required, in order to serve the China market alone, never mind anywhere else.
c) The size of the Chinese market TODAY and the resulting R&D spending means China likely will catchup and develop world-class technology in every field that matters.
The only reason why we were able to have this economic miracle in the first place, was because Deng Xiao Ping, put aside politics, ideology, pride, etc. to focus on economic development. We had rapproachment with the US, because we stopped our aggressive world communism revolution rhetoric, we had rapproachment with Japan because we put aside the differences about WW2. In return we got technology, investment, and access to markets, via normalization of relations and membership in WTO.
The two choices we have:
1) We sacrifice some of our pride: Put away the territorial disputes with ASEAN, Japan, India for now. Doesn't mean we have to concede anything, just tone down the aggressive rhetoric. Solve tensions with the EU over Xinjiang reeducation camps, "Unfair" trade practices and find commonalities that both sides can support: Paris Agreement, Multilateralism, Globalization, etc.
2) We continue our disputes with all these nations and the EU, and end up making a bunch of enemies, that we have to fight, while the US laughs at us while we exhaust our energy feuding with ASEAN, India, Japan, EU etc.
I would say the choices for China are a lot more complicated.
1. If we look at the situation, Chinese rhetoric on ASEAN, Japan and India is actually very tame.
On the other hand, Chinese actions can be very harsh.
Chinese rhetoric and public statements on the Paris Agreement, Multilateralism, Globalisation, COVID are actually reasonable and supported by the vast majority of the world.
And I don't see China actually expending much energy on feuding with ASEAN, India, Japan, EU etc.
External relations always seems to be an afterthought, with domestic Chinese considerations first.
2. With respect to the USA, nothing China does will ever be enough.
China's sheer size and influence - makes it a military, economic, technological and political rival.
3. Domestic chinese economic development is no longer dependent on access to foreign markets.
China now needs to escape the middle-income trap when countries fail to move with the technology value chain.
On that front, the USA will try to hobble China, no matter what China does.
So the response has to be even more technology R&D spending inside China.