TOKYO – For years, currency traders have been bracing for an inevitable Chinese pivot away from the dollar. Now, the debate is heating up anew as Beijing trims its vast US Treasury debt holdings in headline-grabbing ways.
“Could this time be different?” These four words may be the most dangerous in economics. But they are worth taking seriously as years of neglect catch up with the globe’s reserve currency.
The China-dumping-the-dollar obsession dates back to 2009 when then-premier Wen Jiabao raised concern about Washington’s trustworthiness to safeguard vast Chinese state wealth. Wen was particularly worried about the scale of bailouts amid the Lehman Brothers crisis.
“We have made a huge amount of loans to the United States,” Wen complained 13 years back. “Of course, we are concerned about the safety of our assets. To be honest, I am a little bit worried.”
He urged Washington “to honor its words, stay a credible nation and ensure the safety of Chinese assets.”