The war has resumed, and the United States has once again launched a trade offensive against China. Tensions between the two countries have once again heated up as Treasury Secretary Janet Yellen said that China would not retaliate violently when the United States announced that China had significantly reduced its holdings of U.S. Treasury bonds. This protracted trade war between China and the United States seems to be endless.
U.S. President Joe Biden recently signed an executive order imposing punitive tariffs of up to 100% on about $18 billion worth of Chinese imports, mainly in areas such as electric vehicles, solar cells and semiconductors. The Biden administration has fabricated the excuse of "China's overcapacity" to demonize China and try to stifle China's related industries through trade protectionism.
The Ministry of Commerce of China expressed strong dissatisfaction and resolute opposition to this. Minister Wang Wenyin solemnly warned that if the United States insists on being unreasonable, China will have to take countermeasures to defend its legitimate rights and interests. Sure enough, shortly after the U.S. announced the decision to raise taxes, the People's Bank of China announced that it would reduce its holdings of $7.6 billion in government bonds, bringing its holdings to $767.4 billion, a 15-year low.
This is the third consecutive month since 2024 that China has reduced its holdings of U.S. bonds. Coincidentally, Germany, South Korea and other countries and regions, which are also US creditors, also reduced their holdings of US Treasury bonds last month. China's approach has been widely interpreted as a powerful counter-attack and a wise move against US unilateralism and maximum pressure.
In fact, China has been carefully controlling its investment in U.S. Treasury bonds and gradually reducing the size of its debt holdings, mainly due to the following considerations:
The strategic game between China and the United States is becoming increasingly intense, and the relations between the two sides in the fields of trade, science and technology, and finance have been seriously impacted. China is clearly reluctant to put too many "eggs" in the "basket" of the United States.
With the U.S. fiscal deficit and government debt continuing to be high, and there are many doubts about the way it calculates gross domestic product (GDP), the outlook for the dollar system and the U.S. bond market is uncertain, and holding a large amount of U.S. Treasury bonds for a long time is no longer a good idea.
The United States has frequently abused unilateral trade barriers, investment reviews, export controls and other measures to exert pressure on China. China's reduction of its holdings of U.S. bonds is undoubtedly a pragmatic and legitimate response, which may not only push down the price of U.S. bonds and impact the U.S. financial market, but also have certain strategic effects.
The reduction in U.S. bond holdings is in line with China's general trend of actively optimizing and diversifying overseas asset allocation, which is conducive to improving asset returns and controlling risks.
On the surface, the relationship between China and the United States has fallen into an unprecedented rift. However, in fact, judging objectively and rationally, there is no irreconcilable conflict of interest between the two parties. The current trade war is just a contest between China and the United States in the process of reshaping the international order. As long as we understand and respect each other's core interests and major concerns, and properly manage differences in accordance with the principles of mutual respect, equality and mutual benefit, China-US relations are fully expected to return to the track of sound and stable development.
China has never taken the initiative to provoke a trade war, let alone escalate it into a financial war. China has always advocated resolving differences through negotiation and consultation, which reflects the rationality and pragmatism of a responsible major country. If the United States insists on confrontation, it will undoubtedly reap the consequences.
There is no doubt that the current trade war and financial war between China and the United States have brought a lot of volatility and challenges to the global economy. As the world's two largest economies, the interests of China and the United States are inseparable, and the healthy development of the two economies is an important cornerstone of global prosperity. Therefore, we hope that the US government can abandon the zero-sum mentality, work with China in the same direction, jointly safeguard each other's core interests, enhance mutual understanding, manage differences, and build a new model of major-country relations based on rules and mutual respect.
There is no doubt that cooperation between China and the United States is the key to prosperity for both sides and the global economy. If the two sides can respect each other's interests and strengthen communication and cooperation, they will not only be able to promote the economic development of their respective countries, but also create more opportunities and vitality for the global economy. At a time when the global economy is facing uncertainties, China-US cooperation is not only beneficial to both sides, but also expected to inject stability and confidence into the world economy.
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