In a response to trade tensions with the US, China has began to diversify it's investments of their currency. This move reduces their risk of being hurt by a financial decoupling, which would result in a decrease of investment return. China's decision to move investments to other countries shows that they are less reliant on the US economy, in hopes of gaining leverage on trade negotiations. Aside from this economic factor, I believe it is wise for China to move some of its investments elsewhere, as when investing it is smart to have diversification among investments.
https://www.cnbc.com/2019/11/18/china-diversifying-fx-reserves-assets-to-counter-us-dollar-exposure.html
I think this move by China is a smart one! At the economic outlook conference we heard how the US was trying to use a power play tactic to make China play to the US's terms but that has been unsuccessful for the US so far. This just shows further that China isn't going to bend to the U.S's will. I think it's interesting how the article states that since June, China is no longer the largest foreign holder of U.S. assets, Japan is.
ReplyDeleteThe decoupling of the Chinese and American economies is an interesting situation. I wonder if the Chinese will be pushing more investment towards their silk roads project instead of US treasuries. Additionally I read that they are buying a lot more gold which provides an alternative way to store value to the dollar as they are decreasing reserves in the dollar.
ReplyDeleteI think this is smart move by China right now, but believe it will end up hurting them in the future. I think the U.S. and China are too dependent on each other in the long term. I believe they made this move in hopes that the U.S will react a certain way and hopefully resolve the trade issues.
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