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US-China financial flashpoints at a look


U.S. and Chinese flags

FILE PHOTO: U.S. and Chinese language flags are arrange earlier than a gathering between U.S. Treasury Secretary Janet Yellen and Chinese language Vice Premier He Lifeng in Beijing, China, Saturday, July 8, 2023. Mark Schiefelbein/Pool through REUTERS/File Photograph

Washington, United States — From a commerce imbalance to technological competitors, a number of financial flashpoints are boosting tensions between Washington and Beijing — and these are amongst areas through which each Republicans and Democrats can agree.

What’s behind these issues?

American debt 

Republicans specifically are fearful about this situation, involved that China holds an excessive amount of American debt.

The concern is that Beijing might use this to strain Washington by threatening to resell its bonds, bringing down the worth of holdings.

Whereas the American debt exceeds $34 trillion, solely round $8 trillion is held overseas.

READ: Between China and the US, commerce takes a unique route

China is a key holder of US debt, accounting for $816 billion and simply over $1 trillion when Hong Kong is included, in accordance with Treasury Division figures.

However it’s the second largest international holder behind Japan — which holds $1.1 trillion — and forward of Britain.

Tech race 

US President Joe Biden has centered on tech, noting its significance to making sure nationwide safety.

Be it in semiconductors, synthetic intelligence or electrical autos, Washington is searching for to remain forward or meet up with Beijing in varied areas — together with to forestall superior instruments from falling into the palms of the Chinese language navy.

A serious goal throughout former president Donald Trump’s time period was telecoms big Huawei, which the US sought to maintain out of its 5G networks and people of allies.

READ: US companies choosy about investing in China. The exceptions? Burgers, lattes

Restrictions grew below the Joe Biden administration, particularly involving cutting-edge semiconductors obligatory in AI improvement.

The aim, stated Commerce Secretary Gina Raimondo in October, is to restrict Chinese language entry to superior chips that would gasoline breakthroughs in AI and complex computer systems which might be important to navy functions.

Within the area of important minerals, of which Beijing has ample provides, Washington has additionally been searching for to avoid China.

Commerce

Whereas China is now not the highest supply from which the US imports items, the perceived commerce imbalance between the world’s two largest economies stays a priority.

Trump’s tariffs on Chinese language items and makes an attempt to safe a deal to rebalance commerce has failed to show the tide, and the Biden administration has largely maintained levies whereas pursuing efforts in “friendshoring” — or diversifying provide chains throughout allies and companions.

There seems to be some impression with US-China commerce rising much less rapidly, though a deeper look reveals that some Chinese language merchandise are merely routed by different international locations.

Forex battle? 

The query of change charges and using forex for political and industrial functions has been a recurring situation, too.

For years, Washington has accused Beijing of sustaining the yuan at a intentionally decrease charge in opposition to the greenback with a purpose to promote exports.

In November, the US Treasury flagged China’s “lack of transparency” in its change charge mechanism, saying this warranted monitoring.

The priority now facilities on the internationalization of the yuan, with the Chinese language forex nonetheless little current in industrial exchanges.

As of end-2023, fewer than 3.5 % of funds through the SWIFT worldwide digital switch system had been made in yuan — in contrast with almost 19 % in euros and greater than 50 % in {dollars}.



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China needs the yuan to ascertain itself, particularly in commerce, as a safeguard in opposition to potential US sanctions. Beijing in flip believes that Washington is weaponizing the greenback.



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