China has 'Trump cards' in trade war, warns Roach

Cici Cao

China still has several "Trump cards" in hand in the trade war with the US, including key mineral resources for cutting-edge industries as well as the US$1 trillion (HK$7.8 trillion) in US Treasury bonds held by China and Hong Kong, former Morgan Stanley chief economist Stephen Roach says.

In an opinion piece for the Financial Times, Roach, who is known as "China's great friend," urged the Trump administration to scale back unilateral sanctions, consider the risks of Chinese retaliation and evaluate the US economy's dependence on Chinese goods and capital.

The economist who once said "Hong Kong is now over" anticipates broader Chinese countermeasures under the incoming second Trump administration.

For example, China's recent actions on critical minerals indicate the possibility of wide-ranging constraints on rare earths, which are of enormous strategic importance to the US, said Roach.

China and Hong Kong held US$1 trillion in direct holdings of US Treasury securities as of September.

Earlier, China, facing US sanctions on high-bandwidth memory chips and semiconductor equipment, announced plans to ban or limit US purchases of several critical minerals while tightening controls on graphite.

In other news, Jesse Baker, US Deputy Assistant Secretary of the Treasury, met Hong Kong financial institutions, including HSBC, Standard Chartered and Bank of China Hong Kong (2388), to warn against business ties with Russia, according to Nikkei Asia.