China Will Do What’s Best for China: Not Shooting Markets (Bloomberg)

Many of the proposals or suggestions on how China might respond to U.S. tariffs have the air of “Surrender or I will shoot myself in the foot.” They may not only hurt China, but damage the country’s campaign to establish itself as a financial power and hinder the use of the yuan as a reserve currency.

It’s possible China will use talk of such steps to make the Trump administration more flexible, but very unlikely Beijing can follow through.

The proposals that have been put forward include:

• Depreciate the yuan.
• Sell U.S. Treasuries.
• Sell U.S. equities.
• Place tariffs on U.S. oil exports along with soybeans.
• Hinder exports of U.S. services.
• Offset U.S. tariffs with subsidies to Chinese exporters.

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