Chinese Portfolio Management and Economic Weapons: Understanding the Risks and Benefits

The ongoing Chinese portfolio management of US government debt seems unlikely to result in a sell-off, as it may not be an effective economic weapon. Economic measures often harm the initiator. If the coupling between the US and China is pushed too far, there will be harsh consequences. However, implementing targeted trade measures, like restricting exports of resources controlled by China, could be more effective. The Chinese have already begun exploring such measures, as seen in their sanctioning of a US microelectronics company.