I mean they suddenly decide that the asset they bought in trillions as safest investment available around is suddenly worthless - and not only try to hide it, but actually loudly proclaim that all their holding are worthless (I imagine so that it would be easier to sell them at the best price?) I don't see China doing something like that. First, they would need to find a reason why US debt has become worse investment than yesterday - and second, even if they find this reason, they won't ever "drop it like hot potato" - that would be a suicide (in Chinese conditions, probably a literal one for somebody that would cause such loss of billions to the state).
> If China dumped a trillion dollars of US financial instruments at firesale prices over the course of a year, that would cause a lot of mayhem.
Why would they? Other than collective insanity, there'd be no reason for such behavior.
What? How would telling the world that US debt is worthless help them sell their holdings of US debt at higher prices?
Economic warfare.
It’s like buying a car from a friend then turning around and selling it for a dollar.
You hurt yourself more than you hurt the other person.
It's also a huge bargaining chip. If China dumped a trillion dollars of US financial instruments at firesale prices over the course of a year, that would cause a lot of mayhem.