As the trade conflict between the world's two largest economies escalates and China and the U.S. fire at one another with sharp import tariffs, some have raised fears of another powerful tool of Chinese retaliation: its American debt holdings.
But China's government is not considering reducing its U.S. Treasury bond holdings anytime soon, Vice Finance Minister Zhu Guangyao told CNBC's Eunice Yoon Wednesday.
"China is a responsible international investor," Zhu said, making reference to Chinese Premier Li Keqiang, who said during the country's latest Monetary Policy Committee meeting that reducing U.S. Treasury holdings was not on the table. "What the premier said is our policy."
China is the largest foreign holder of U.S. debt, which is rapidly mounting amid massive government stimulus programs. Beijing holds $1.17 trillion in Treasury bonds, according to official stats, helping to finance the growing budget deficit. If it were to halt its bond purchases, government interest rates could potentially skyrocket, as well as force borrowing rates up for consumers and companies.
Speculation over the Chinese-owned debt has abounded thanks to some mixed messages. On Tuesday night, Chinese ambassador to the U.S. Cui Tiankai responded to a question on Treasury bond purchases simply by saying that, "If the other side makes a wrong choice, we have no alternative but to fight back."