Beijing - (Saba):
China holds what amounts to an "economic nuclear option." It owns $761 billion in US Treasury bonds, which theoretically gives it the ability to cause a violent shock in US financial markets if it decides to liquidate these assets.
Although the likelihood of such a move is considered slim at the present time, observers believe that the mere possession of this asset by Beijing gives it strategic leverage over Washington.
Economic analyst Tom Longo, according to Sputnik, says that China's holding of this large amount of bonds is not surprising, but rather a natural result of its massive trade surplus with the United States.
He added, "China is recycling dollars generated from its trade by purchasing US bonds, with the aim of reducing exchange rate risks and maintaining its economic stability."
Longo believes the likelihood of this financial bombshell "exploding" is very slim, "because a sudden sale would lead to an appreciation of the yuan, which would weaken the competitiveness of China's exports, something Beijing is desperately trying to avoid."
Instead, Longo points out that China is moving toward "phasing out the dollar" through deliberate steps, including offering yuan-denominated bonds to its trading partners in Southeast Asia, such as Malaysia and Thailand, thus strengthening the influence of its local currency in international trade.
But the surprise came at the end of his speech, when he declared that "the real threat to financial stability does not come from Beijing, but from Europe."
Longo explained: "I fear that Brussels will use the Ukraine crisis as an excuse to reshape its financial system through high-risk defaults or to pave the way for the launch of a digital euro."
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