Wayne m morrison china us trade issues available at

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28. Wayne M. Morrison, China - US Trade Issues ”, April 16, 2018, available at:
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US - CHINA Trade War: Analyses of Deeper Nuances and Wider Implications 27 China s Holdings of US Treasury Securities: 2002 - 2017 ($ in billions) (Source: US Department of the Treasury) Could China use its role as No. 1 lender to exert pressure in a trade war? It would be a risky manoeuvre, in which China itself would potentially have much to lose. But, it cannot be ruled out. If China were to suddenly unload some of its holdings, or even signal an intention to buy fewer dollar assets in the future, that would probably cause long - term interest rates in the US to rise, at least temporari- ly. And this would cause some pain in the US, as borrowing costs would rise. Furthermore, China needs to maintain significant reserves of the US debt to manage the exchange rate of the renminbi. Rise of currency s exchange rate would make the Chinese exports more expensive in foreign markets. It would also drive down the value of China s existing bond portfolio, meaning China could lose billions. And, it would tend to push down the value of the dollar relative to other currencies, which would actually help the US attain more advantageous trade terms. As such, China s holdings of the American debt do not provide China with undue economic influence over the US. 29 That doesn t mean there isn t room to cause some near - term pain and disruption. The Chinese have some leverage to rattle the US bond markets, even if the threat of substantive action is not very credible. Given that a trade war with such a major trading partner is without precedent in modern times, we don t really know what it would look like. But, it s a safe bet that Chinese officials are already thinking through their options in case that is where the latest round of economic sabre rattling ultimately leads. 30 29. “ Is it a Risk for America that China holds over $1 Trillion in US Debt? available at: - debt/?utm_source= CSIS+All&utm_campaign=9876bdd0d0 - EMAIL_CAMPAIGN_2018_03_ 02&utm_medium=email&utm_term=0_f326fc46b6 - 9876bdd0d0 - 174083245 30. Neil Irwin, If There s a US - China Trade War, China May Have Some Unconventional Weapons ’”, The New York Times, April 5, 2018, available at: https:// - china - trade - war - unconventional - retaliation.html? emc=edit_mbae_20180405&nl=&nlid=7575417020180405&te=1&login=smartlock&auth=login - smartlock
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US - CHINA Trade War: Analyses of Deeper Nuances and Wider Implications 28 Why does China Buy US Debt? China s large US Treasury holdings say as much about the US power in the global economy as any particularity of the Chinese economy. The US debt is an in - demand asset. It is safe and convenient. As the world s reserve currency, the US dollar is extensively used in international transactions. Trade goods are priced in dollars and due to its high demand, the dollar can easily be cashed in. Further- more, the US Government has never defaulted on its debt.
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