Will the US freeze China’s $3 trillion foreign exchange reserves?Think but dare not do

2022-04-27 0 By

As the United States appropriated $9 billion in Foreign currency from Afghanistan, some of it went to compensation for the families of those killed on September 11, 2001, and some to set up a special fund to help Afghanistan rebuild.It could be said that the United States had hacked Afghanistan’s foreign currency, leaving the latter with little room to resist and little choice but to comply.After all, as far as Afghanistan is concerned, foreign exchange reserves are not its own currency, and the US can hack them if it wants to, because this is what the US is good at, forcing these small countries to comply through a series of repression measures.Of course, this is not the first time the US has done this. It has also hacked the assets of Venezuela, Iran, Cuba, Iraq and other countries.The biggest reason for this is that the former Afghan government was supported by the United States. In this case, the foreign exchange reserves would naturally be kept in the United States, so of course the United States could hack it at will.In this regard, the outside world has to ask, China also has a large amount of foreign exchange reserves, is also facing the situation of being hacked or frozen by the United States?Of course, on the surface, China’s foreign exchange reserves are the largest in the world, amounting to about $3.2 trillion according to relevant data.However, China’s foreign exchange reserves are not all in US dollars, but also in Japanese yen, euro, pound and other currencies, including Us Treasury bonds and US dollars held by China, about US $1 trillion.Many people who do not understand this will think that if the United States does not pay the money?So today, I will explain these problems in detail.It should be noted that the FOREIGN debt of the United States has exceeded 30 trillion DOLLARS, accounting for about 3.4 percent of the foreign debt of the United States in terms of the Treasury debt held by China.And the biggest holders of TREASURIES are domestic investors, not foreigners, of which the Federal Reserve is the absolute biggest.In that case, even a sell-off wouldn’t cause much of a stir if the U.S. didn’t pay back its debt, so it wouldn’t be realistic to sell Treasurys.Second, the International Emergency Economic Powers Act, passed in 1977, allows the president to exercise business control at special times, including blocking transactions and freezing foreign assets.That means the United States can freeze the dollars in China’s foreign exchange reserves, or it can simply hack them, but it cannot.After all, if the United States dares to hack the dollars in China’s foreign exchange reserves, it is tantamount to declaring war with China, plus there are many American companies in China, and their funds are also in Chinese banks.This means that if the United States hacked China’s dollar, China could freeze the funds of American companies at home, a kind of reciprocal counterattack.As for the so-called us dollar credit and anonymous US Treasury bonds, it is not entirely correct.Isn’t America worried about the collapse of its credit system if it hacks the Afghan dollar?Moreover, foreign exchange reserves act as China’s financial firewall, preventing the US from unilaterally raising interest rates and causing a flood of dollars to flow back to China.Second, the reserves can be used to buy, or control, some of the core assets, and of course help internationalise the renminbi.After all, China’s yuan can only be used in a small area and cannot be circulated globally like the U.S. dollar.Under such circumstances, it is natural to have a certain amount of foreign exchange reserves. Even so, the United States cannot easily hack China’s dollar foreign exchange.Because foreign exchange reserves are like “financial nuclear weapons”, once detonated, the consequences would be unimaginable, at least the United States would not choose to bear the consequences, so the United States may have long wanted to freeze China’s dollar in mind, or even want to black China, but it is in a state of thieving heart but not thieving courage.After all, it’s one thing to think, but it’s another thing to dare.(By Hua Qiang)