China to weaponize U.S. Treasuries? Scott Bessent says Xi Jinping will have to think twice before doing so, citing these reasons

With increasing geopolitical tensions and volatile financial markets, US Treasury Secretary Scott Bessent downplayed concerns that China could weaponize its huge reserves of US Treasuries to destabilize American markets, as per a report.

Will Selling US Treasuries Hurt China More Than the US?

According to him, China would not sell US Treasuries because it would affect China's economy by weakening its currency, reported Benzinga.

During an interview with Yahoo Finance, Bessent pointed out that, “If they started selling Treasuries, they’d have an effect on the price. But more importantly, they accumulate dollars, and what are they gonna do with the dollars?” as quoted in the report.


He explained that, “So if they sell Treasuries, then they would have to sell RMB, and it would strengthen their currency, and they’ve been doing just the opposite. They’ve had a weak RMB or Yuan policy. So, it really serves no purpose for them to weaponize Treasuries,” quoted Benzinga.

As per the report, China is an export-oriented economy and it benefits from a weaker currency. This is because, a weaker currency makes exports more competitive in the internaltion market by making them cheaper for foreign buyers, reported Benzinga.

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US Has Backup Plans

However, in case China does end up selling the US Treasuries despite the effect on their currency, Bessent asserted that the government and the Federal Reserve’s have the ability to handle the situation, as per the report.

He said, “We have a big toolkit, we do buybacks, and the Federal Reserve has Treasuries at a certain level. If the Federal Reserve believed that a foreign rival were weaponizing the U.S. government bond market or attempting to destabilize it for political gains, I am sure that we would do something in conjunction with each other, but we just haven’t seen that,” quoted Benzinga.

FAQs

Doesn’t China want a strong currency?
No. China’s economy benefits from a weaker currency because it helps boost exports.

Would selling Treasuries really make the yuan stronger?
Yes, because China would have to sell off some of its currency to buy back US dollars. That would push the value of the yuan up, but China would not want that as it’s not in their economic strategy.