China possesses a range of powerful economic tools that could potentially be used as leverage in geopolitical disputes, particularly with the United States. These assets include control over rare earth minerals essential to high-tech manufacturing and a substantial amount of U.S. government debt.
Rare earth elements are critical for a wide array of modern technologies, from smartphones to military equipment. China currently dominates global production and processing of these minerals, accounting for more than 60% of global output. While other nations are working to establish alternative sources, China’s role in the supply chain remains pivotal.
In addition, China holds over $800 billion in U.S. Treasury securities, making it one of the largest foreign holders of American debt. This economic relationship creates mutual dependency: while the U.S. benefits from China’s investment, China risks devaluing its own holdings if it chooses to offload them aggressively.
Experts caution that although China’s economic tools offer potential leverage, their use could entail significant consequences, such as destabilizing financial markets or accelerating the global shift away from reliance on Chinese rare earths.
Overall, while China has significant economic influence, its ability to exercise that influence is constrained by the risks of retaliation and the interdependent nature of the global economy.
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