The United States has been issuing treasury bonds for a long time, and it can be said that it has implemented the saying "spend other people's money to do your own business" to the end. China has also bought a lot of U.S. debt and once became the largest "creditor" of the United States.
It is said that those who owe debts are the boss. After the Russia-Ukraine conflict, the United States launched a heavy blow against Russia, one of its "creditors", directly freezing Russia's foreign exchange assets and declaring the U.S. debt held by Russia invalid. Simply put, the United States does not intend to pay Russia back.
This makes people worry. As Sino-US relations continue to deteriorate, what will happen if the United States freezes all U.S. debt and foreign exchange assets purchased by China like it did to Russia?
China's way out
First, do not put all your eggs in one basket; the U.S. is not a reliable partner, and our country has long realized this. Therefore, in recent years, we have been committed to developing bilateral relations with other countries.
In addition to making friends, we are also actively joining various organizations to develop multilateral relations, such as the BRICS summit. Our country is one of the founding members of the BRICS alliance, and the BRICS summit only discusses economics without involving politics.
Moreover, the biggest feature of this alliance is the ability to exchange goods for goods and local currency exchange. We trade energy with Russia in this manner, with Russia exchanging oil and natural gas for our industrial products.
Not only at the BRICS summit, but when we sign free trade agreements with other countries, we support local currency exchanges or barter, which allows us to bypass the dollar. Our trade with other countries will not be greatly affected by the depreciation of the dollar.
Moreover, if one day China and the U.S. go to war, and the U.S. freezes our assets again and excludes us from the dollar trade system, we can still maintain normal trade relations with other countries, and our domestic economy will not be too severely affected.
Secondly, in recent years, our country has vigorously promoted RMB internationalization and digitalization. Up to now, 28 countries have begun to use RMB for settlement in our trade, and these trades will not be included in the SWIFT economic system. We are trying to step out of the dollar settlement system.
The U.S. uses the hegemonic position of the dollar to impose sanctions and threaten other countries to force them to choose sides, while also using 'dollar tidal waves' to harvest the global economy, shifting its own economic crisis onto other countries, causing much suffering.
Countries have long been dissatisfied with the United States using the dollar as a tool to maintain global hegemony, and the actions of the U.S. have severely impacted the formulation of economic policies in various countries.
To reduce the impact of the dollar on our country's finance and trade, China has proposed an economic system of RMB internationalization and local currency settlement. Establishing a stable currency system can enhance our country's ability to withstand the impacts of dollar fluctuations.
Our approach is like opening a new world for other countries. Many countries have also begun to emulate us, and de-dollarization has become an unspoken 'little secret' among countries.
The current European Union is beginning to attempt trade settlements dominated by the euro, and ASEAN has proposed to reduce reliance on the dollar and euro and establish an independent currency settlement system at its 2023 meeting. Global de-dollarization is unstoppable.
Thirdly, China can gradually sell off the U.S. Treasury bonds it holds, just like buying stocks, selling a little bit each time to maintain a relatively stable price. If a massive sell-off causes a crash in U.S. bonds, we would ultimately incur losses.
Our country has long begun to gradually sell off U.S. Treasury bonds. When the U.S. started printing a large amount of dollars and issuing bonds, we quickly became alert and began selling off in advance. From last year to the first quarter of this year, we have sold nearly $135.1 billion in U.S. bonds.
In recent years, with the support of the Belt and Road Initiative, we have gradually increased our foreign investments, which can boost the local economy while exporting Chinese products. More and more countries are choosing to join this big family of China, and the RMB-centered trade system is gradually solidifying.
Previously, countries kept buying U.S. Treasury bonds, becoming capital that the U.S. could threaten. Russia has shown everyone the rogue face of the U.S., and countries have begun to implement 'de-dollarization', which can weaken the risks caused by the U.S. defaulting to some extent.
The RMB trade system that our country is vigorously promoting currently has 40 countries signing currency swap agreements with China. The RMB trade system is continuously growing and improving. When the RMB system and the dollar system can be equally balanced, the U.S. will not be far from decline.
