U.S. COLLAPSE! Finance and Commerce Secretaries Hope to Visit China Soon to Find a Way Out.
China, the second-largest creditor of the US, has been reducing its holdings of US treasuries since 2013, with the total sell-off amounting to $450 billion or a 35% reduction. Japan, Saudi Arabia, and other countries may also continue to sell US treasuries or even empty their holdings entirely. Around 27 countries have been selling US treasuries, leading to a rapid decline in the number of treasuries held by foreign investors.
To stabilize the precarious U.S. economy, Treasury Secretary Yellen faces a difficult challenge. One potential solution is to hope for China’s cooperation, even if they don’t increase their holdings of U.S. Treasuries. Yellen may need to negotiate with China to slow down the pace of their sale of U.S. Treasuries, which would provide the United States with a much-needed breathing space.
However, the current state of relations presents a significant obstacle to any potential negotiations. Pelosi’s recent visit to Taiwan has led China to suspend the US-China military dialogue channel, indicating that China’s trust in the United States has eroded.
To rebuild trust and gain bargaining power in negotiations, the U.S. must offer significant concessions to China. While the lifting of restrictions on Chinese photovoltaic solar products and the relaxation of mandatory COVID-19 testing for Chinese visitors to the United States are steps in the right direction, they may not be enough.
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