It’s no secret that China has amassed a huge trove of US treasury notes, bonds and bills, and if they need or want to dump a significant quantity at any given time – it could have a catastrophic effect on the value of global dollar US economy. However, the Chinese government will also not want to do a massive sell it off all at once because it may also backfire on their own economy. That said, Beijing may also see the prudence in lowering its exposure to US debt in the event that Washington continues to escalate, or engage in a war in the Pacific, namely over the issue of Taiwan. Also, China may also be motivated to make the first move due to the possibility that the US and its allies may try to pre-empt any tactical moves by China by imposing heavy sanctions and start freezing China’s dollar assets and access to the international banking system.
China may have no choice, as the U.S. Federal Reserve appears to be bowing to political and other pressure to start easing interest rates ahead of the November election..
Asia Times reports…
Eurizon SLJ Capital predicts that Chinese companies to shed at least $1 trillion in dollar assets as repatriating capital heads China’s way.
The US Federal Reserve has a rather checkered history in Asia, particularly since the mid-1990s. The last time the US central bank tightened with the ferocity it did in recent years was between 1994 and 1995. That doubling of short-term rates within 12 months paved the way for the 1997-98 Asian crisis as a runaway.
Behind Asia offers some additional analysis on China’s increasing de-dollarization efforts. Watch:
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