Beijing is waving a treasury bond against Washington
15:14 - 05/08/2020
Information / follow-up ..
In response to Washington's requests to compensate it for the Corona virus, China may remove a portion of the US Treasury bonds, according to the South China Morning Post.
Analysts reached this theory after reports said the White House was considering seizing part of the bonds held by China as compensation for the Corona crisis.
Analysts likened US bonds to China with a "nuclear weapon", as the latter possesses more than a trillion dollars in treasury bonds, and selling them may jolt global financial markets.
Analysts say that China’s disposal of bonds makes sense, as the idea of discussing the possibility of bond confiscation by the US administration may prompt China to take measures to reduce risk.
"It is a natural reaction from Beijing that Washington is willing to confiscate US bonds owned by the Chinese government," Russia's Alexei Zubits, director of the Institute of Social and Economic Research of the Financial University of the Russian government, said in an interview with "Sputnik". Of its investments in American securities after Washington began to impose sanctions on Moscow.
According to expert estimates, China can find bond buyers either inside or outside the United States.
The expert stressed that such a step would have dire consequences for the United States, and the talk is not about high inflation, and believes that China selling part of the bonds will shake confidence in US debt instruments.
The main risk here is not inflation, but the fact that international investors will be disappointed, as the US treasury bonds are risk-free assets, and they have immunity, as they cannot be seized, and if Washington confiscates bonds in which Beijing has invested its money, Zobits said. Doing so will undermine confidence in these securities.
"The Americans have recently been killing the chicken that lays eggs that are golden, and they believe that they can do without foreign investors, as they are increasingly using Treasury bonds as a political tool," the expert added.
According to data from the US Treasury Department last February, China holds US Treasury bonds worth $ 1.092 trillion, and the Chinese giant ranks second in the list of the largest holders of these bonds.
Japan tops the list with investments amounting to $ 1.268 trillion, while in the third place comes the United Kingdom with investments amounting to about $ 400 billion, followed by Brazil in the fourth position ($ 285 billion). End / 25