China: US Debt Holdings in Potential Trade War

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China may resort to devaluing its currency or discarding its massive holdings of US debt in the event of a trade war with the United States, however analysts warn that both could be double-edged swords.

Trump ignited fears of possibly destabilising stand-off between the world’s top 2 economies after after threatening tariffs on Chinese imports, leading to warnings of eye for an eye measures against hundreds of billions of dollars worth of goods.

There are discussions within Beijing that President Xi Jinping should pay more attention to other weapons at his disposal. A member of the Chinese central bank’s monetary policy committee, Fan Gang, hinted that Beijing could stop buying US Treasuries.

This is following a report in the Global Times nationalist tabloid which quoted researcher Huo Jianguo of the Center for China and Globalisation, who threated that if they sell $200 billion US debts, it would significantly put a lot of pressure on the financial market in the US.