Authored by Milton Ezrati via The Epoch Times,

Anticipating what tactics Beijing might use against U.S. President Donald Trump amid trade negotiations, several media outlets here, in Europe, and elsewhere have begun to speculate that China will threaten to distance its economy and its trade from the dollar—de-dollarize in the popular parlance—and perhaps sell off its extensive holdings of U.S. Treasury debt.

Neither act, however, is at all likely, certainly not as an immediate bargaining chip.

It is easy to see why commentators would seize on notions like de-dollarization. Beijing for years has sought to raise the yuan’s international profile, often at the expense of the U.S. dollar. In its wide-ranging Belt and Road Initiative, for instance, it often insists that arrangements and contracts are denominated in yuan and not dollars, as is customary elsewhere.

Beijing has promoted the idea of moving away from the dollar among the so-called BRICS nations (Brazil, Russia, India, China, and South Africa). China’s Asian Infrastructure Investment Bank denominates loans and grants in yuan, not dollars. Beijing has contracted for large oil purchases in yuan, not dollars. Its extensive dealings with Russia dispense with the use of dollars. And the People’s Bank of China has aided the effort by promoting a digital yuan.

But Beijing is also well aware that China, as an export-dependent economy, must hold dollars to back its trading activities with most nations.

For all Beijing’s efforts to supplant the dollar with the yuan, the dollar nonetheless acts as a basis for 80 percent of the world’s import-export activity, even when Americans are not involved. The dollar has a presence in 90 percent of all currency transactions, compared with only 4 percent for the yuan.

China could shed the dollar and still have access to global trading and currency arrangements, but it would have to accept much less effective and efficient arrangements to do so.

In other words, de-dollarization would hurt China much more than it would hurt the United States, and both Beijing and Washington know this.

Nor is China likely to threaten the sale of its holdings of U.S. Treasury debt.

There is no denying that China’s holdings are huge. Some estimates put the figure at just under $1 trillion, second only to Japan’s holdings of about $1.13 trillion. This would seem to give Beijing leverage, but all involved know that the sale of these holdings would deny China a liquid market in which to invest its necessary holdings of U.S. dollars.

Moreover, an extensive sale would depress the price of U.S. Treasury bonds, imposing losses on Beijing’s balance sheet at a time when China’s domestic economic troubles make such a loss especially hard to bear. To be sure, such a sell-off would hurt Washington, but it would hurt Beijing even more, and both sides know it.

Beijing also knows that China’s interests would suffer from the tendency for any of these steps to weaken the dollar’s foreign exchange value and strengthen the yuan. In these circumstances, China’s central authorities would do better to weaken the yuan’s foreign exchange value, especially against the dollar. Such an action would make Chinese goods cheaper to dollar-based buyers and accordingly offset some of the adverse pricing impact of existing and threatened U.S. tariffs.

Instead, the yuan has recently gained value against the dollar. Beijing could reverse this trend if it were to talk down the currency actively by publicly eschewing de-dollarization and any talk of selling off holdings of U.S. Treasury debt.

It hardly warrants saying that matters today remain highly uncertain.

Trump’s next move is impossible to guess, as is Beijing’s.

For all the uncertainty, however, it is still possible to set aside all the talk of de-dollarization and asset sell-offs, for the very practical reasons outlined here and also because Beijing, in these ongoing negotiations, has zero interest in antagonizing Washington.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.