China is being backed into a corner on currency

Against the odds, China's winning strategy of buying US assets and keeping the renminbi pegged to the greenback may come back to bite it.

When China first started stockpiling US Treasuries as it kept its currency pegged to the US dollar, never in its wildest dreams would it have imagined begging the US not to default on debt obligations.

Currently China is the largest holder of US Treasuries, clocking up $US1.277 trillion, accounting for 22 per cent of Treasuries. Japan is not far behind with a $US1.135 trillion holding.

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