China has other 'weapons' in its trade battle with the United States — and selling off its U.S. Treasury holdings will not be one of them, said Richard McGregor, senior fellow at the Lowy Institute.
— and selling off its U.S. Treasury holdings will not be one of them, said Richard McGregor, senior fellow at think tank Lowy Institute.The move fueled concerns that China, the largest foreign owner of U.S. Treasurys, could employ the so-called— the ability to sell off its Treasury bonds and trigger a surge in interest rates that would damage the American economy.
"The Chinese current account deficit is now under 1% of GDP," he explained. "If China were to do anything to the U.S. dollar, that would obviously hurt Chinese holdings of the U.S. dollar. And I also don't think they want to see the disruptive affect that will have.""China can manage its economy, manage its entry to its economy," he said.
More importantly, he said, people should be watching how Chinese private companies navigate their way through this difficult time, because the implications of their success will have a major impact on the Chinese economy. "I think what we need to watch is how they sort of manage or limit the damage — that is if the trade war goes on, and particularly if we get another round of tariffs."
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