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Open Discussion Discuss China's nasty threat to retaliate against the US in the trade war would backfire cata at the General Forum; China's nasty threat to retaliate against the US in the trade war would backfire catastrophically Now that the US trade ...

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Old 05-13-2019, 05:11 PM
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Default China's nasty threat to retaliate against the US in the trade war would backfire cata

China's nasty threat to retaliate against the US in the trade war would backfire catastrophically



Now that the US trade war with China has begun, people on both sides are talking about the idea that China could retaliate against the US by selling Treasurys.
That is utter nonsense.
Selling a meaningful amount of US Treasurys would have harmful reverberations on China's economy, not to mention the world's.
Plus, China needs US Treasurys and other related instruments to manage its own currency during this turbulent time.


Quote:
One measure China could take that keeps popping up in conversation is that the country could start dumping its massive hoard of $1.1 trillion worth of US Treasurys en masse, depressing their value.

It sounds terrible. Luckily, it's highly unlikely to happen because a Treasurys dump would hurt the US, China, and the world, in that order. Selling US Treasurys would depress the value of the dollar, making Chinese exports more expensive. Plus, it would limit China's ability to manage its own currency, the yuan, if this trade war got really out of control.

Quote:
That's just what China's selling of Treasurys could do to the largest economies. As for the world, it means China would be engaging in a dangerous game of currency manipulation. Analysts at Société Générale said in a note to clients out Monday morning that messing with the value of the yuan — either depressing or strengthening it — is a tool that China is unlikely to use because it's unwieldy, and the risks of it spinning out of control are high.

"Financial market tools are just too complex to harness," they wrote.
Read more of this in depth opinion at site.
By selling bonds they would have cash flow...
Do you think they would pull that suicide pin?
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