The trade war between the United States and China is still ongoing although it is closer to a resolution now than it was at the beginning of the year. Each country is looking for an agreement that will be beneficial to its citizens while maintaining the delegate balance of the global economy. According to Richard McGregor, a senior analyst at the Lowy Institute, the Chinese government isn’t going to sell off its U.S Treasury holdings in a bid to win the war. He noted that they have other weapons which they will deploy.
China Will Not Sell-off Its US Treasury Holdings
When the trade war started intensifying, China increased the pace at which it cut down its United States debt holdings. The rate at which the debt holdings were cut off is the fastest in the past two years. Following the move, there have been rising concerns about how far China is willing to go in this trade war. Some analysts said that there is a high chance that the Chinese government will sell off all its Treasury bonds. This move will lead to a spike in interest rates and would be damaging to the American economy.
McGregor said that China isn’t going to choose this option because it is going to weaken the USD/YEN pair significantly not hurt the United States alone. McGregor suggested that the country might employ other options like managing foreign access to its economy. They can either make things easier or more difficult for foreign companies.
McGregor said that another factor that will affect the trade war is the personal relationship between President Donald Trump and President Xi Jinping. The good relationship between both leaders was what allowed them to come to a temporary truce even when their advisers were at war. If this relationship is disrupted, things will be worse for both countries.