Inside Track
Chinese Economy, Stock Market Continue to Crater
News that China has offloaded more than $100 billion of U.S. Treasuries in August to support its currency and its cratering stock market caused many observers to raise concerns about China waging an “economic war” against the United States. It’s a threat the Chinese last expressed during the 2012 presidential election, that Beijing would “use its financial weapon to teach the U.S. a lesson” if it insisted on flouting Chinese interests, i.e., by selling arms to Taiwan, for example.
It now appears that the shoe is on the other foot. The Asian tiger is now a pussycat, as its economy continues to crater and the Chinese central bank moves to weaken its currency and shore up its stock markets.
In the days following Beijing’s surprise announcement on August 11 that it was devaluing its currency by two percent, the yield on the U.S. 10-year Treasury note jumped 10 percent, from 2.00 percent to 2.20 percent. Since then it has remained quiescent, forcing financial analysts to explain why.
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