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Brad Setser questions whether Pakistan would face restrictions if it tries to use a U.S. currency swap to pay its various Chinese state creditors.
He highlights that while Pakistan needs to boost its reserves, there may be unresolved issues about how such swaps would function for specific payments.
Setser has previously noted that European leaders see current trade relations with China as unsustainable. He also reported on sharp declines in German auto exports to China, risking around 0.6 percentage points of GDP. These developments add context to growing concerns about payment imbalances and external reliance linked to China.