United States vs China
The largest bilateral economic pair, decoupling trends, CNY/USD, and equity correlation.
Structural Relationship
The US-China relationship is the largest bilateral economic relationship in the world, measured by total goods trade, cumulative cross-border investment, and shared embeddedness in global supply chains. At the macro level, the US runs a persistent goods-trade deficit with China and a services surplus; at the financial level, China holds around 750 to 850 billion dollars of US Treasuries (down from a peak above 1.3 trillion in 2013) and the US financial system holds equity exposure to China mainly through listed ADRs and emerging-market funds. The yuan is managed against a currency basket with a daily reference rate set by the People's Bank of China, so dollar-yuan is not a free float; it is a managed spread. This structure means China can absorb or release cross-currency pressure at policy discretion, which is why sharp yuan moves are usually interpreted as policy signals rather than market outcomes.
The decoupling theme has been running since 2018 across tariffs, export controls, financial sanctions, and investment restrictions. It has not reversed the gross trade flow but has redirected marginal new capacity; FDI into China from US corporates is near multi-decade lows, and semiconductor capital equipment flows have been restricted by US export controls. On the equity side, Chinese ADR delistings from US exchanges and VIE structure concerns have reduced the overlap in index membership that existed in the mid-2010s. Policy divergence is structural: the US runs demand-side fiscal and monetary policy aimed at consumption and price stability, while China has been running supply-side policy aimed at manufacturing capacity, deleveraging in real estate, and state-direct credit allocation. These differences mean the two economies reach full capacity at different points in the global cycle.
Durable linkages: trade, monetary plumbing, financial flows. Updated when the underlying structure shifts, not on every data print.
Current Divergence Read
The current read is the dollar-yuan fixing relative to the daily band, the onshore-offshore yuan spread (a stress gauge), the Shanghai Composite and Hang Seng relative to US equities, and any signal on tariff policy. Sustained dollar strength puts managed pressure on the yuan; policy typically responds by widening the daily band or letting the rate drift rather than defending aggressively. Watch dollar-yuan, Treasury vs 10Y CGB, and China PMIs.
Historical Episodes
Frequently Asked Questions
Is the yuan a free float?+
No. The PBOC sets a daily reference rate and allows the rate to move within a band around that fixing. Sharp moves in the fixing are typically read as deliberate policy signals about the PBOC's tolerance for dollar strength.
How much decoupling has actually happened?+
Total US-China goods trade is still near record highs in absolute terms, but its share of US imports has fallen and its composition has shifted away from advanced electronics and toward lower-value goods. The biggest decoupling has been in capital flows and semiconductor equipment, not in bulk trade.
Why does China hold fewer US Treasuries than it used to?+
The current-account surplus has narrowed from 10% of GDP to around 2% over twenty years, so the flow into reserves is smaller. China has also been diversifying into gold and other assets. Treasury holdings are not a trading position; they are mechanical reserves accumulation.
Can China sell Treasuries to retaliate?+
Selling aggressively would damage the value of China's own remaining Treasury holdings and would strengthen the yuan (by selling dollars), which is the opposite of what China typically wants. The lever exists in theory but the self-harm is enough that it has not been used.
How does tariff policy affect the macro read?+
Tariffs are a one-time relative price shock that shows up in US CPI on the affected goods, in Chinese export volumes to the US, and in currency pressure on the yuan. The inflation effect is usually localised and offsets partly over time through supply-chain substitution.
Are Chinese equities correlated with US equities?+
The correlation has fallen sharply since 2018. Offshore China (Hang Seng, H-shares) still has some correlation to US risk-on and risk-off; onshore China (Shanghai Composite) trades more on domestic policy and credit signals and has low correlation to US equities.
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Live data sourced from FRED (including OECD MEI releases), CoinGecko, and central bank series. Profile last generated 2026-04-14. This page is for informational purposes only and does not constitute financial advice; cross-country comparisons simplify institutional and regulatory differences that matter for trading and policy interpretation.