Washington is concerned about China39s industrial overcapacity

There are economic and commercial tensions at all levels between China and the United States

Trade balance, technological catch-up, political use of exchange rates or even American debt held in China – Washington's accusations against Beijing are numerous and one of the rare topics on which Republicans and Democrats agree.

American debt

Republicans in particular are most likely to believe that China holds too much American debt. This could actually give him leverage over Washington if it threatened to resell its bonds, thereby driving down the value of the whole thing.

U.S. debt exceeds $34 trillion, but only $8 trillion is held abroad. China is now one of the countries with the highest debt, but regularly reduced its share in 2023, only to increase it slightly at the end of the year.

According to the Treasury Department, China currently holds $816 billion in U.S. debt, just over $1 trillion if Hong Kong is included. It is the second largest foreign holder after Japan (1,138 billion) and just ahead of the United Kingdom (753 billion).

Technology race

US President Joe Biden has applied pressure with a clear goal: to “ensure the national security” of the United States.

Semiconductors, artificial intelligence (AI), electric vehicles: Washington wants to be ahead of Beijing or catch up. And prevent the Chinese army from having the latest technologies.

During Donald Trump's term, the main target was the telecommunications company Huawei, the world's number one in the industry, which the US wanted to keep out of its 5G networks and those of its allies.

With Joe Biden, restrictions have increased. “The goal is always to limit the Chinese army’s access to the most advanced semiconductors that could drive advances in AI and advanced computing,” US Commerce Secretary Gina Raimondo recalled in mid-October.

One important point remains: the strategic materials necessary for these new technologies, over which Beijing currently has extensive control. Here too, Washington's goal is to bypass and isolate China.

trade balance

Although China is no longer the United States' most important trading partner, now overtaken by Mexico, it is the country with which the trade balance remains the most unbalanced, despite numerous efforts to correct the problem.

Donald Trump had increased tariffs on Chinese products to put pressure on Beijing and rebalance trade. The trade agreement between the two countries signed in January 2020 allowed for some marginal developments, but the trend remained the same.

Under Joe Biden, tariffs remained in place, coupled with a policy of “decoupling” that ultimately became “risk reduction” to be less dependent on China for supply chains deemed critical.

The effect seems to be noticeable; trade from China is growing less quickly than from the rest of the world. But in reality, some Chinese products are now simply taking another step toward the United States via Mexico or Vietnam, new trading strongholds.

Currency war?

The question of exchange rates and the use of currencies for political and commercial purposes is a recurring theme. For many years, Washington has accused Beijing of deliberately keeping the national currency, the yuan, at a lower exchange rate against the dollar in order to promote its exports. In early November, the Ministry of Finance deplored China's “lack of transparency” in its exchange rate policy.

But the concern now focuses on the internationalization of the yuan. In fact, the Chinese currency still has little presence in commercial exchanges: at the end of 2023, less than 3.5% of payments through the international banking system SWIFT were made in yuan, compared to almost 19% in euros and more than 50% in dollars.

But China wants the yuan to establish itself especially in trade to avoid possible US sanctions, as Beijing believes Washington is using the dollar as a weapon. The yuan was used in trade with Brazil, Russia and Argentina.