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US-China decoupling
EconomyGlobal Economy

China should bail on US bonds even faster, scholar says, as bilateral tensions and anxieties mount

  • Though China is already unloading its holdings of US government bonds, a prominent scholar is suggesting it do so at a speedier clip
  • Risks associated with investment in Treasuries seen as too high to sustain as bilateral relations grow tense and chances of ‘weaponisation’ increase

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Though China is already divesting itself of US Treasuries, a prominent scholar is encouraging the country to do so even faster. Photo: AFP
Frank Chenin Shanghai

China’s investment in US government bonds is fraught with risks, tepid returns and other vulnerabilities – all of which should motivate Beijing to unwind its holdings further and avoid being held “hostage” by Washington’s “exorbitant privileges”, a prominent scholar has said.

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Di Dongsheng, vice-dean of Renmin University’s School of International Studies, warned the enormous sums of Chinese assets and capital parked in the US could be “taken hostage” by Washington if Beijing were to step up the defence of its sovereignty and territorial integrity.

“There’s no reason to load up on US Treasuries,” Di said in an article for the April issue of Contemporary International Relations, the journal of state think tank the China Institutes of Contemporary International Relations.

“We have seen how Washington treated Russia’s overseas assets, and its sequestration of German and Japanese assets during World War I and World War II.”

He also said the prevalence of US Treasuries and the US dollar as a medium of international exchange exemplify the country’s “exorbitant privilege”, creating an entrenched global dominance that allows Washington to binge on debt and make gains at the expense of others.

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