China has sold US bonds for the seventh time in a row, and Biden has imposed restrictions on 13 Chinese companies!
Regularly updated"Practical"information, bring you a different perspective and value, thank you for your attention!When discussing China's successive sell-offs of US bonds and the subsequent US sanctions against Chinese companies, we can't help but think of an economic phenomenon –"Adverse selection"。The term was first coined by economist George Akerlof when discussing market information asymmetry to describe market inefficiencies caused by information inequality.
Applying this theory to the Sino-US financial friction seems to provide a new perspective. First of all, the essence of adverse selection lies in the degradation of quality caused by information asymmetry. As China continues to sell U.S. bonds, this behavior sends a signal to the market, which may be a reflection of uncertainty about the U.S. economic outlook or a reflection of tensions in bilateral relations. This information gap is exacerbated to some extent by U.S. sanctions on Chinese companies, making it difficult for market participants to accurately assess the true intent and potential impact behind these policies. In addition, if we extend the theory of adverse selection to the level of international relations and the global economy, we will find an interesting phenomenon: when a country adopts a certain policy, it is often based on its own information and judgments, which other countries may not fully understand or accept.
In this case, the formulation and implementation of policies could lead to the global economy"Adverse selection", i.e., decisions made by countries based on local information can lead to a decrease in the overall efficiency of the global economy. Taking the Sino-US financial friction as an example, China's choice of ** US bonds may be based on the consideration of diversification of foreign exchange reserves. The United States chooses"Coercion"The behavior of Chinese companies is indeed somewhat puzzling. However, from a global economic perspective, these decisions based on local information may not be so ideal.
They may lead to fluctuations in the global capital market, increase the uncertainty of cross-border investment, and even affect the stability of the global ** chain. So, does this kind of decision-making based on local information really contribute to the overall efficiency of the world economy?This question may seem unrelated to the topic of the article, but it is actually closely related. When analyzing the financial strategies of the United States and China, we should not look at one country alone, but look at the world and consider the long-term global implications of these decisions.