Why China does not risk dumping the US national debt


Despite the change of power in Washington, the long-awaited detente has not occurred in relations between the United States and China. The Democratic Party is in no hurry to take a step forward, while Beijing continues to gradually get rid of American Treasuries, following in Moscow's footsteps. What's next: the two largest economics of the world will agree on new rules for coexistence and joint development, or will the PRC and the US continue to diverge in different directions, which in the long term inevitably means a war between them, at first "cold", and in the future, possibly, "hot"?


Today in Washington they call America's main adversary not so much Russia as China. Some evil irony is that the United States has fed this "Chinese dragon" on its own. In the nineties, after the collapse of the USSR, a sole "hegemon" emerged in the now unipolar world. Seeing no more real threat to themselves, American businessmen began to withdraw production from the United States to the countries of Southeast Asia, Taiwan and China, where there was a lot of cheap labor, and no one had heard of labor protection standards. Liberal economists enthusiastically talked about the arrival of the post-industrial era, leaving hardworking and smart Chinese to pore over blueprints and microcircuits.

How it ended up is well known: the Celestial Empire has become not only a generally recognized "world workshop", but also a powerful high-tech economy, which is a real competitor to the American one. President Donald Trump tried to stop or at least slow down the process of further rise of the PRC by staging a real trade war, but he did not succeed in achieving any impressive result. The problem is that over the past decades, the economies of the United States and China have become closely intertwined, becoming seriously dependent on each other. Trump's sanctions strikes against Chinese companies immediately boomerang back to the Americans themselves. How are these two largest world economies dependent on each other?

At first, a significant part of US-developed products are still actually manufactured in China, where there is a developed technological and a logistics base, experienced workers, as well as our own rare earth metals in large quantities. This is extremely beneficial for American business. Somehow it was calculated that for the assembly of one iPhone smartphone, Chinese contractors receive something like $ 10. Moving production back to the United States sounds very patriotic, but who in their minds would refuse such super profits?

SecondlyOver the past decades, both superpowers have been very actively investing in each other before President Donald Trump began to put a spoke in the wheels of this process. In 2017, the United States invested $ 14 billion in the PRC economy, and China in the United States - $ 30 billion. However, the Republican banned US federal pension funds from investing in companies associated with the Chinese military-industrial complex. He also signed a law restricting the possibility of placing shares of companies from the PRC on American stock exchanges. It is not surprising that the volume of Chinese investments in the American economy over the past three years has decreased by 90%, and by the end of 2020, China overtook the United States as the main investment destination in the world, having managed to attract $ 163 billion against $ 134 billion from a competitor.

ThirdlyBeijing is still one of the largest holders of US government debt. Until recently, it was in first place in this rating, but now it has gone down, yielding positions to Japan and Great Britain. Despite the dumping of assets under the "Russian scenario", China still owns treasuries worth about a trillion dollars. This is a huge amount of money that Beijing can get by simply dumping all these assets. In the expert community, this portfolio of bonds was even called "financial nuclear weapons" capable of bringing down the US dollar. Indeed, a one-time sale of so many securities can cause serious damage to the US economy. But not only to her. This measure will boomerang back to China itself, which is well understood in Beijing, where they prefer to get rid of the Treasuries gradually.

All of the above testifies to one thing: the American and Chinese economies are closely linked, and, despite the mutual sanctions imposed during the four-year rule of President Donald Trump, in the "coronavirus" 2020, the volume of mutual trade between them increased by 8,3% , amounting to 586,72 billion dollars. Therefore, "waving a sword" in these matters is fraught with each side. Beijing and Washington now face extremely difficult choices. The simplest solution seems to be to leave everything as it is, agreeing on new rules of the game, division of spheres of influence and norms of peaceful coexistence between the PRC and the United States. But will this suit "America Who Returns"? Will China agree that in four years' time Donald Trump or another leader firmly standing on "imperial" positions may return to Washington and everything will start anew?

Apparently, Beijing has already made its far-reaching conclusions. China, with its 1,5 million population and a powerful industrial base, is betting on the development of its own internal market in order to stop critically dependent on access to the American and even European. The Chinese analytical foundation Chongyang Institute, which is considered an analogue of the RAND corporation, recently published an article by the former deputy head of the international relations department of the Chinese Communist Party of China, Zhou Li, which can be considered a programmatic one. In it, the party functionary noted the unacceptability of China's dependence on the United States in the financial sphere:

The United States controls the main channel for international payments and clearing, namely the SWIFT system.

The main thought of this publication is the conclusion about the need to create an independent economic bloc, "based on the yuan", capable of resisting the Western bloc and its dollar. Filling in information about possible changes in the external policy through retired high-ranking officials is Beijing's favorite PR practice. In the West and in Japan, the publication was immediately noticed and hotly discussed. What do we get in the bottom line?

The PRC has obviously made a choice in favor of a gradual drift towards complete independence from its "sworn partner." Economic methods alone cannot stop the "Chinese dragon". Only other methods remain, as US Secretary of State Anthony Blinken directly stated:

We must begin to confront China from a position of strength.

In other words, objective contradictions inevitably push the two superpowers to a "cold" war, accompanied by attempts to arrange another "color revolution" for a competitor, or even "hot" in the future.
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  1. Alexander Betonkin 19 March 2021 13: 03
    0
    While all this is beneficial to both countries, everything will drag on like a swamp.
  2. Jacques sekavar Offline Jacques sekavar
    Jacques sekavar (Jacques Sekavar) 19 March 2021 15: 26
    +1
    Beijing continues to gradually get rid of American "Treasuries"

    The PRC pursues a policy of a common destiny, economic partnership, develops foreign trade, creates economic alliances and agreements, and therefore an elementary simple question - can all this be done by abandoning the leading world currency, which accounts for about 70% of world settlements?

    the long-awaited detente between the US and China never happened

    To put it mildly, only very naive people hoped for a relaxation of relations between the United States and the PRC, because we are talking about the fate of states with different social systems, systems of state structure and management, economic and any other development of them and the whole world in the future.

    What will happen next: the two largest economies in the world will agree on new rules for coexistence and joint development, or the PRC and the United States will continue to diverge in different directions

    Anything is possible, Comrade Xi said bluntly - China does not want war, but it is not afraid of war either.
    By this, Comrade Xi expressed very clearly the consolidated position of the party, government and people.
    To whom was it addressed in the first place?
    The most likely scenario is that they will try to fight, fight, fight on the periphery, but a big war brings unacceptable losses to both and is therefore ruled out.
    A regional war on the periphery, especially by someone else's hands, is to the benefit of both - it will give an additional stimulus to the economy, scientific and technological progress, will designate claims and spheres of influence, etc.
    There is no need to go far for an example - Syria is a vivid example of this.

    the irony is that the United States fed this "Chinese dragon" on its own

    There is no irony, everything is logical - in the pursuit of super profits, big capital transferred production facilities to the PRC, and with them technologies.
    Maintenance of modern production required qualified personnel, stimulated education, science, technology, engineering corps, living standards and everything else, and when the PRC and the world consumer goods factory became a competitor to high-tech industries, problems arose, no one needed competitors. They tried to strangle it - it was not that, and now the PRC can put pressure on the United States too without straining, but this is not yet in China's interests. In the USA they understand this and are trying to somehow play on this, but the chances for this are scanty.
  3. Bakht Online Bakht
    Bakht (Bakhtiyar) 20 March 2021 13: 24
    +3
    The simplest solution seems to be leave everything, as it is, having agreed on new rules of the game, the division of spheres of influence and the norms of peaceful coexistence between the PRC and the United States.

    This is unacceptable for the States. As well as the new rules of the game. The old rules were created by the States and for the States. New rules can only appear as a result of war

    After lunch, Churchill was still in charge of the conversation. However, the change was already beginning to take its toll. It first appeared sharply in connection with the question of the British Empire. The initiative came from the father.

    “Of course,” he remarked in a confident and somewhat sly tone, “of course, after the war, one of the prerequisites for a lasting peace should be the broadest freedom of trade.

    He paused. Head down, the Prime Minister gazed at his father from under his brows.

    “No artificial barriers,” my father continued. - As few economic agreements as possible that give some states advantages over others. Trade expansion opportunities. Opening up markets to healthy competition. He looked innocently around the room.

    Churchill turned in his chair.

    “Trade agreements of the British Empire…” he began impressively. His father interrupted him:

    - Yes. These imperial trade agreements are what we're talking about. It is because of them that the peoples of India and Africa, the entire colonial Middle and Far East, are so lagging behind in their development.

    Churchill's neck turned red and he leaned forward.

    - Mr. President, England does not intend for a moment to relinquish its advantageous position in the British dominions. The trade that brought greatness to England will continue on terms set by British ministers.

    “You see, Winston,” my father said slowly, “somewhere along this line, you and I may have some disagreements. I am firmly convinced that we cannot achieve a lasting peace if it does not entail the development of backward countries, backward peoples. But how can this be achieved? It is clear that this cannot be achieved by the methods of the eighteenth century. So ...

    - Who is talking about the methods of the eighteenth century?

    - Every minister of yours who recommends a policy in which a huge amount of raw materials is withdrawn from a colonial country without any compensation for the people of that country. The methods of the twentieth century mean the development of industry in the colonies and the growth of the well-being of the people by raising their living standards, by enlightening them, by making them healthy, by providing them with compensation for their raw materials.

    On Churchill's side, this was an admission that peace could only be won on the basis of conditions set by the United States of America. And, having said this, he thereby acknowledged that the British colonial policy had come to an end, just like Britain's attempts to occupy a dominant position in world trade and her desire to play the USSR and the USA against each other.
    And all this would really come to an end if the father were alive.

    Eliot Roosevelt "Through His Eyes"

    Currently, we see the US attempts to maintain its position in world trade. As Roosevelt said, one of the reasons for the outbreak of the war (the First World War) was Germany's desire to dominate trade in Europe. This was unacceptable for the UK. It is now completely unacceptable for the United States to change the established trade relations. The new rules mean the end of the hegemon. Hence the sanctions, restrictions, customs barriers. The States turned into England at the beginning of the 20th century.