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US-China economic flashpoints at glance

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The economic relationship between the United States and China is riddled with tension, stemming from a multitude of factors including trade imbalances and technological competition. These concerns have garnered bipartisan attention in Washington, highlighting the gravity of the situation.

A significant worry for Republicans is the substantial amount of American debt held by China, raising fears of potential leverage Beijing could exert by threatening to sell off bonds. While the total American debt surpasses $34 trillion, only a portion of approximately $8 trillion is held internationally. China, along with Hong Kong, holds over $1 trillion in US debt, making it the second largest foreign holder after Japan.

President Joe Biden has emphasized the importance of technological advancement, particularly in areas crucial for national security such as semiconductors, artificial intelligence, and electric vehicles. The administration aims to maintain or regain superiority over China in these domains to prevent the transfer of advanced technologies to the Chinese military. Efforts under the Biden administration include stringent restrictions on entities like Huawei and measures to limit Chinese access to cutting-edge semiconductors.

Despite China’s no longer being the primary source of US imports, the perceived trade imbalance remains a significant concern. Previous attempts by the Trump administration to address this through tariffs and trade deals have had limited success, with the Biden administration maintaining tariffs while pursuing supply chain diversification strategies among allies and partners.

The manipulation of exchange rates and the use of currency for political and commercial advantages have been contentious issues. Washington has long accused Beijing of artificially devaluing the yuan to bolster exports. In November, the US Treasury expressed concerns over China’s lack of transparency in its exchange rate policies, particularly as China aims to internationalize the yuan to mitigate potential US sanctions.

The economic flashpoints between the US and China underscore the complex and multifaceted nature of their relationship. As both countries vie for dominance in critical sectors and navigate trade imbalances, the path forward remains uncertain. The Biden administration’s approach reflects a continuation of certain policies initiated under the previous administration, signaling a degree of bipartisan consensus on the need to address these economic challenges posed by China.

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