Why China will resist dumping US Treasuries

Occupying a prominent place in the bilateral trade and economic relationship between the United States and China is the US$16 trillion (S$22 trillion) Treasury bond market. As the world's two biggest economies escalate their rivalry, anxiety over whether China will abruptly use its US$1.1 trillion holdings of US Treasuries as a trade-war weapon is rippling through the bond market.

Rather like US President Donald Trump's numerous tweets extolling the benefits of tariffs for the US economy, the idea that China will undertake a major liquidation of its Treasury debt portfolio as a weapon does not stack up.

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A version of this article appeared in the print edition of The Straits Times on May 21, 2019, with the headline 'Why China will resist dumping US Treasuries'. Print Edition | Subscribe