More than once selling US bonds in the hands of China has been suggested as a powerful tool in the trade war with the US. But selling those treasuries does not make sense, says economist Arthur Kroeber, author of China’s Economy: What Everyone Needs to Know® in the South China Morning Post.
The South China Morning Post:
In spite of policy and political uncertainty under the Trump administration, the liquidity and security that US Treasuries offer continues to be unrivalled by any other form of asset.
Arthur Kroeber, co-founder and research head of Gavekal Dragonomics, said a Beijing sell-off of US Treasuries, which was utterly unlikely, would only make Beijing look reckless and foolish – the last thing Xi would want as China seeks to play the “good guy” in contrast to the unpredictable Trump.
In addition, a big sale from China of US Treasuries in the open market would mean China would have to buy replacement assets, but none constituted a viable alternative, Kroeber said.
It is not surprising then, that during the three rounds of trade talks between Beijing and Washington, neither Beijing nor Washington publicly made China’s holding of Treasuries as an issue for negotiation.
Are you looking for more experts guiding you through the trade war between China and the US? Do check out this list