By David Brennan- 4 Sept :

President Donald Trump’s administration has fired the starting gun on decoupling with China, as ties between Beijing and Washington, D.C. deteriorate amid the coronavirus pandemic, territorial disputes, a trade war and long-standing ideological contest.

There is growing bipartisan desire in Washington, D.C. to address China’s rise and shelve the failed commercialist approach of past decades, which has enriched an increasingly authoritarian Beijing and allowed it to expand its influence.

The Trump administration has combined tough rhetoric with action—sanctions for human rights abuses, a costly trade war and increased military posturing and spending. Some Chinese companies—branded “Trojan horses” by Secretary of State Mike Pompeo are also being pushed out of the U.S. market, with the White House leaning on its allies to follow suit.

China is reciprocating. Officials and state media have condemned the U.S. for its increasingly tough stance, warning that Washington is risking peace and stability in an effort to maintain American hegemony, something Beijing believes is on the wane.

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China is considering a range of options to push back on the U.S. Global Times—a nationalistic newspaper owned by the People’s Daily, which is the official publication of the Chinese Communist Party—said Thursday Beijing could seek to leverage its U.S. debt holdings to increase pressure on Washington, D.C.

China is second only to Japan in its U.S. Treasury securities holdings, totalling more than $1 trillion. This is down from a peak of some $1.32 trillion in 2013, after which Beijing has focused on diversifying its holdings.

Global Times said China may slowly reduce its holdings to around $800 billion “as the ballooning U.S. federal deficit increases default risks and the Trump administration continues its blistering attack on China.”

Chinese economists who spoke to Global Times suggested this plan could be accelerated if the U.S. imposes further sanctions on China.

A rapid, large dump of U.S. securities would wreak havoc on financial markets. Interest rates would likely rise in the U.S. and tensions between the world’s two largest economies would ratchet up further into unprecedented territory.

But it would hurt Beijing too. Shaun Breslin, a professor of politics and international studies at the University of Warwick in the U.K., told Newsweekthat rapidly ditching U.S. treasuries “would have so many detrimental impacts on China as well, not least massively reducing the value of anything that they had left.”

It would also incur reputational damage for Beijing, making other nations more wary of dealing with them.

“It wouldn’t be wise for China economically to sell all of them in a short period of time,” Jue Wang, an associate fellow at the Chatham House think tank and an assistant professor at Leiden University Institute for Area Studies in the Netherlands, told Newsweek.

“China also wouldn’t want to get involved in a financial war with the U.S. on top of a trade war,” Wang said. “It’s too costly…I don’t think it would be used as a tool.”

It is more likely that China will continue reducing its treasuries holdings, but not through the kind of sudden action that would upend global financial markets and undermine the U.S.

State newspapers are often used to issue threats and make suggestions that CCP officials and diplomats cannot. “It’s about signaling,” Breslin said of the Global Times report.

Chinese-held treasuries are but one element of the simmering U.S.-China conflict, and state newspapers like the Global Times are building a steady drumbeat of antagonism to the U.S. and its allies.

source : Newsweek.