- China may have run a small-scale test of the "nuclear
option" in its trade war with the US by selling $20 billion worth of US
government debt.
- If China sold its $1.2 trillion in US Treasurys, it could
raise America's borrowing costs, weaken the US dollar, and plunge global
markets into chaos.
- A fire sale, however, would strengthen the yuan, making
Chinese exports less attractive, and could spin the currency out of
control.
China may have run a small-scale test of the "nuclear option" in its
trade war with the US. The Asian nation sold $20 billion worth of US
Treasurys in March, possibly foreshadowing a total offloading of
American government bonds that would plunge global markets into chaos. China is the biggest foreign holder of US government debt, with more
than $1.2 trillion in Treasurys, or about 7% of the entire market. The
latest sale represents its largest disposal in over two years,
according to the Financial Times.
While the world's second-largest economy occasionally sells US
Treasurys to replenish its reserves or support its currency, the yuan,
those don't appear to be the reasons for the latest dumping...
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