The Chinese government has begun making what can be described as veiled threats about dumping U.S. Treasury bonds into financial markets. The Chinese Communist Party currently owns more than $1 trillion in US Treasury securities.
The CCP’s premier state-owned English-language media outlet, Global Times, ran a featured story last week, citing “state-linked experts” that the Party may begin dumping its U.S. government holdings.
There has always been chatter about the CCP doing such a thing but the fact that it has now made front-page news in the Times lead many watchers to believe that a threat was being made.
“China may gradually reduce its holdings of US Treasury bonds to about $800 billion from the current level of more than $1 trillion as the ballooning US federal deficit increases default risks and the Trump administration continues its blistering attack on China,” the story reads, citing unnamed experts.
“But of course, China might sell all of its US bonds in an extreme case, like a military conflict,” professor at the Shanghai University of Finance and Economics Xi Junyang, is quoted as saying.
Such a “nuclear option” may no longer be devastating in the final analysis however, as the U.S. Federal Reserve has issued three times as much debt as China holds in the past 3 months due to the Covid19 pandemic and the related economic downturn.
Photo by QuoteInspector.com