A recent article from the Business Insider argues that the US may currently have a leg up on China.
The argument goes, China holding a large portion of US debt is not necessarily bad for the US and may give the US leverage to use to pressure China into allowing its currency to float.
The leverage comes from the effect of China selling its US debt. If China was to do so it would devalue the Dollar against other world currencies boosting US exports and helping the US to eliminate the trade deficit.
It is still worrisome that China holds such a large portion of our sovereign debt but the reciprocity of the arrangement provides some stability.
I will be interested to see the results of the US Treasury report on the Chinese Yuan and if the Treasury will call China on their currency manipulation.
