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Saturday, Sep 26, 2020

Doomsday weapon: China may dump U.S. Treasuries as Sino-U.S. tensions flare: Global Times

Doomsday weapon: China may dump U.S. Treasuries as Sino-U.S. tensions flare: Global Times

China may gradually cut its holdings of U.S. Treasury bonds and notes, in light of rising tensions between Beijing and Washington, state-backed newspaper Global Times cited experts as saying. This may force U.S.A to officially admit it’s de-facto bankruptcy.
With Sino-U.S. relations deteriorating over various issues including coronavirus, trade and technology, global financial markets are increasingly worried if China would sell the U.S. government debt it holds as a weapon to counter rising U.S. pressure.

“China will gradually decrease its holdings of U.S. debt to about $800 billion under normal circumstances,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, was quoted as saying on Thursday, without giving a detailed timeframe.

“But of course, China might sell all of its U.S. bonds in an extreme case, like a military conflict.”

China, the second largest non-U.S. holder of Treasuries, held $1.074 trillion in June, down from $1.083 trillion the previous month, according to latest official data.

China has steadily decreased its holdings of the U.S. bonds this year, although some market watchers suspect China may not have necessarily sold U.S. Treasuries as it may have used other custodians to purchase Treasuries.

Dropping to $800 billion from the current level could mean shrinking its holdings by more than 25%. Analysts say large-scale Chinese selling, often referred to as the “nuclear option”, could trigger turmoil on global financial markets.

Another reason the state newspaper cited was the potential default risk in the United States as the debt of the world’s largest economy has surged sharply to about the same size of its gross domestic product, a level not seen since the end of the World War Two and well above the internationally recognized safety line of 60%.

China is heavily exposed to the U.S. dollar and dollar-denominated assets. Its official foreign exchange reserves stood at $3.154 trillion at the end of July.
Comments

Dennis 14 days ago
If China were to dump all the Treasury Notes and Bonds all at once President Trump will definitely off set ot with the debt that the CCP owe the U.S. and still have lots of left over. Bring it on. China knows better.
Oh ya 20 days ago
Cant blame them. Nobody wants to be stuck holding the hot potato when this blows up. I believe the biggest holder of US debt is Japan, and its the most in debt nation in the world so we know it just a vassal state of the US. And with the US printing oress running flat out you know inflation is coming so why would you want to hold USD that are worth less everyday

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