- China is not ‘seriously considering’ using its US government bond holdings as a weapon in the trade war with the United States.
- Donald Trump and Xi Jinping will discuss trade at the G20 meeting this weekend.
- Trump has threatened to lift or apply additional tariffs on all Chinese goods entering the United States should a trade deal not be be agreed upon.
China is not “seriously considering” using its US government bond holdings as a weapon in the trade war with the United States.
According to China’s ambassador to the United States, Cui Tiankai, such a move would be akin to “playing with fire”.
“We don’t want to cause any financial instability in global markets. This is very dangerous, this is like playing with fire,” Cui said in an interview with Reuters.
“I don’t think anybody in Beijing is thinking seriously about this. It could backfire.”
As at the end of September China held $US1.15 trillion in US government debt, according to US Treasury data.
Given escalating trade tensions with the United States, some had speculated China could threaten to sell down some of these holdings, a move that could lead to upward pressure in long-term borrowing rates, instability in financial markets and slowdown in the US economy.
According to Reuters, Cui said China’s Treasury holdings were a good example of the economic interdependence between the United States and China, a relationship he said would be nearly impossible and dangerous to untangle.
The soothing remarks come ahead of a key meeting between Xi Jinping and Donald Trump at the G20 meeting this weekend. Trade will understandably feature heavily in discussions.
On Tuesday, White House economic adviser Larry Kudlow said that Trump believes “there is a good possibility that a deal can be made, and that he is open to that”.
However, he said that “certain conditions have to be met”, adding that the White House was disappointed with the Chinese response to recent trade negotiations.
“Their responses have disappointed because … we can’t find much change in their approach,” Kudlow said.
“President Xi has an opportunity to change the tone and the substance of these talks. President Trump has indicated he is open — now we need to know if President Xi is open.”
Should no deal be struck on the sidelines of the G20 meeting, Kudlow said the US could still lift or apply additional tariffs on all Chinese goods entering the United States.
“As we’ve all learned, he means what he says,” Kudlow said, referring to Trump.
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