Letters | China should use US treasury holdings as leverage to lower US tariffs

Readers discuss how Beijing might work with the incoming Trump administration, shoebox housing and the retirement age in Hong Kong and the treatment of an Iranian protester

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China has stepped up its efforts to promote the use of the renminbi in international transactions, which is part of the larger push aimed at eroding the dollar’s strength in global finance. Photo: NurPhoto via Getty Images

Published: 11:30am, 14 Nov 2024

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In the report, “China seeks safe havens amid US dollar risks” (November 10), the writers rightly pointed out that the US dollar has been the weapon of choice for American presidents waging economic wars. Meanwhile, China has stepped up its efforts to promote the use of the renminbi in international transactions, which is part of the larger push aimed at eroding the dollar’s strength in global finance.

The US dollar accounts for just under 60 per cent of global foreign exchange reserves, but when it comes to the settlement of global trade, other currencies are making inroads. According to the Bank for International Settlements, the dollar’s share in trade invoicing and payments ranges from about 40 to 50 per cent, smaller than its share in global reserves.

Newly elected US president Donald Trump knows well that the cause of America’s economic and financial woes is foreign wars, and that ending these wars will put an end to the “blood-letting” of spiralling fiscal debt. If Trump can end the wars in Ukraine and the Middle East, he can save a colossal sum of money every year. This will go some ways to pay off the US national debt, which stood at US$35.46 trillion at the end of September.

Historian Niall Ferguson once noted that the US-China economic interdependence had seemed at a time like “a marriage made in heaven”. At the low ebbs, they are a grumbling couple.

I believe China can use its holdings of US Treasuries to bargain with the incoming Trump administration. The Chinese could promise to incrementally buy more US Treasury securities, from US$774.6 billion as of August to previous levels of more than US$1 trillion, if Trump would lower his planned tariffs on China. This would be a win-win deal.