Washington may be forced to renege on its huge debt to Beijing under catastrophic circumstances, says the former head of the Bank of England Mervyn King. He suggests governments could mitigate risk by diversifying their assets.
“Who knows what the future holds, but China and other countries do not want to be in a situation where all their international assets are in effect dependent on the US,” said King, who was the Governor of the Bank of England from 2003 to 2013, in an article for Gold Investor magazine.
“Of course the US would not want to renege on its debts, but if some awful conflagration occurred, then all China’s assets in the US might be annulled,” said the former BoE chief, adding that China and other countries should diversify their portfolios, making them less dependent “on the goodwill of other countries.”
China is the biggest holder of US debt with $1.245 trillion, according to US Treasury data.
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