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To fight back Trump, China still has three major destructive weapons

US President Trump’s tariff on China’s 200 billion US dollars has risen to 25%, which has caused the US-China trade war to heat up again. Although China has not yet resorted to counter-measures, experts believe that Beijing still holds three major counter-attack weapons, including The depreciation of the renminbi, the sale of US Treasury bonds, and the refusal to purchase US soybeans, etc. But the measures have to be taken carefully, otherwise they may hurt China itself.

Weapon 1: RMB depreciation

China can offset the impact of US tariffs on the Chinese economy through the depreciation of the renminbi. However, Wang Tao, the chief Chinese economist at UBS, pointed out that the depreciation of the RMB in 2015 caused capital outflows and also weakened domestic confidence. So China may have  concerns to use this weapon.

Weapon 2: Selling US Treasury bonds

China currently holds US$1.1 trillion in US Treasury bonds. As the biggest amount holder of most US debts, the reduction of US debt is a powerful weapon against the United States. However, the mainland has a foreign exchange deposit of 3.1 trillion US dollars. In addition to purchasing US debt, there is no better investment pipeline, so it is unlikely to reduce US debt.

If the mainland sells US Treasury bonds, it will lead to a sharp fall in prices and a rise in yields, which will not only devalue the US debt in its hands, but also cause the US dollar to soar and bring greater risks to the financial market.

Weapon 3: Refusing to buy American soybeans

Mainland China is the largest buyer of soybeans in the United States. The US soybean growing area is the ticketing warehouse for Trump. It is very important for Trump. Therefore, compared with the RMB depreciation and the sale of US Treasury bonds, not buying the US soybeans could be a more feasible way of fighting back.

(source from China Times )
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