That would drive up the cost of US government interest rates. Why buy US bonds at 4 percent when you can buy US bonds held by China at 5 percent? China takes a hit on the bonds, but it forces the US to raise interest rates.
“Why buy US bonds at 4 percent when you can buy US bonds held by China at 5 percent? “
But wouldn’t the buyer of US bonds with a 5% interest rate have to pay a premium for them? Sorry, I should know this. I never took the time to figure out the market for held debt obligations.