China has allowed the yuan to depreciate so that 1 US dollar buys more than 7 yuan. (REUTERS: Thomas White)
Julia Horowitz, CNN Business: China has a $1 trillion trade war weapon. Will it ever use it?
London (CNN Business)In the US-China trade war, it's been a week of rapid escalation. Beijing devalued the yuan after the Trump administration threatened to slap tariffs on just about every Chinese export. The United States then labeled China a "currency manipulator," deepening the rift.
The exchanges have rocked global markets and threaten the global economy. What happens next is anyone's guess.
China has said it is prepared to fight, if necessary. And it has one hugely powerful weapon up its sleeve: it's the American government's biggest creditor.
In theory, Beijing could trigger a panic in bond markets by dumping some of the $1.1 trillion in US Treasuries that it owns.
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WNU Editor: The problem with all of this speculation on China's US treasury holdings is that this money has probably already been leveraged for other loans (see link here). And even if China decides to sell these holdings (if it has not been used as collateral), I know that they will be bought up almost immediately. The U.S. is a $22 trillion economy, and there are many other players who would like to get their hands on these bonds. This talk of a Chinese $1 trillion trade weapon is just that .... talk.