The main trump card of Beijing in the confrontation with Washington after another escalation of the trade war and the decision of the Chinese side to weaken the yuan becomes the US national debt. CNN writes about it.
China is the main foreign lender to the US — Beijing holds US Treasury bonds worth $ 1.1 trillion. If China decides to take advantage of this fact and starts selling US debt, it can lead to a sharp drop in the value of government securities and, as a consequence, an increase in the yield on them due to the riskiness of the asset. As a result, the cost of servicing the public debt for the United States will increase dramatically.
Meanwhile, the yield of Treasury bonds affects the cost of commercial and consumer loans. Therefore, the potential actions of Beijing will also affect corporate bonds, the cost of mortgages and car loans in the US, which will negatively affect the growth rate of the US economy.
“However, there are several important reasons why China is likely not to pull the trigger. First, it just may not give the expected result. Secondly, it can hit the Chinese economy,” CNN writes.
Such a step will lead to the strengthening of the yuan, which is unprofitable for China, which in the last week weakens the national currency, to put pressure on the US and give its producers an advantage in the form of cheaper than its competitors.