China Could Cut US Debt Holdings: SCMP

As tensions between the United States and China rise, analysts point out that China could reduce its holdings of US treasury securities. The United States borrows heavily to pay for its Covid-19 response, and the administration blames China for the pandemic. News reports suggest that some US officials have questioned if the $1 trillion in debt owed to China could be cancelled. Such an extreme measure would trouble global markets, ruin the US credit rating and hike US interest rates. Larry Kudlow, US National Economic Council director, denied such discussions, adding the “Full faith and credit of the United States’ debt obligation is sacrosanct.” Such reports could discourage ongoing US debt purchases by China. China would resist selling off its holdings all at once, harming both countries, but leaders may strive for gradual diversification. “The US Treasury two-year yield continued to trade near record low levels this week, suggesting market traders and fund managers are largely shrugging off what is widely seen as a far-fetched idea that the US could cancel some or all of China’s debt,” writes Karen Yeung for South China Morning Post. The US president has also threatened new import tariffs. – YaleGlobal

China Could Cut US Debt Holdings: SCMP

As US borrows for Covid-19 response, China could gradually reduce US debt holdings, annoyed over trade threats and talk of Covid-19 compensation
Karen Yeung
Thursday, May 7, 2020

Read  the article from South China Morning Post about concerns over US debt.

Karen Yeung joined the Post in 2017 after more than 15 years’ experience on global newswires in Hong Kong and Shanghai. She spent eight years in Shanghai and has received awards for best feature, analysis and agenda-setting.

Also, read the response by Larry Kudlow, US National Economic Council director.

 Social Security/Other Trusts	$3,  China  $1,  Other US govt programs $2,  US Federal Reserve $4,  Banks, US investors $8,  Japan $1,  Other foreign holders	$4

China holds a relatively small share of US debt (Source: The Balance)
Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved

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