The trade war between Beijing and Washington has stoked concern in financial mar...
- The trade war between Beijing and Washington has stoked concern in financial markets that China might opt to weaponize its holdings of more than $1.1 trillion worth of U.S. Treasuries in retaliation for the tariffs the Trump administration has imposed on Chinese imports.
China has been slimming its Treasury securities portfolio for some time, but most analysts see an aggressive reduction of its holdings as a remote possibility at most. There is no evidence Beijing is seriously looking to flood markets with its U.S. bonds.About a decade ago, China overtook Japan as the largest foreign holder of U.S. government debt.
Its share of the Treasury market has fallen even faster, due to the steady issuance of U.S. debt required to finance the growing federal budget deficit. A natural place for China to park a lot of those greenbacks is the U.S. Treasury market, which is by far the largest and most liquid pool of safe assets in the world.
Also, because Treasury yields are a benchmark for U.S. consumer and business credit, interest rates on everything from corporate bonds to homeowners’ mortgages would rise, likely slowing the economy.
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