China wouldn’t let geopolitical issues drive decisions on foreign exchange holdings, the Eurasia Group said, after Bloomberg News reported officials had recommended scaling back U.S. government debt purchases.

“While U.S.-China tensions are rising, it is very unlikely that China would slow its purchases of U.S. Treasuries to warn the Trump administration against aggressive trade measures,” analysts for the political risk consultancy, including Asia Director Michael Hirson and Global Strategy Director Karthik Sankaran, wrote in a note Thursday. “We are also skeptical of this hypothesis in the near term.”

Senior government officials in Beijing reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, Bloomberg reported Wednesday, citing people familiar with the matter. The debt is becoming less attractive compared with other assets and trade tensions with the U.S. may provide a reason for the shift, the thinking of the officials goes, according to the people.

While it wasn’t clear whether the officials’ recommendations had been adopted, yields on the benchmark 10-year note spiked to near the highest level since 2014 on the news.

Debt Weapon

The report fueled concern that China might use its $1.2 trillion Treasury stockpile—the largest of any foreign country—as leverage should U.S. President Donald Trump act on his administration’s increasingly confrontational trade rhetoric. Trump is facing decision time as deadlines approach over whether to slap tariffs on imports from steel and aluminum to solar panels, which would be clearly aimed at China.

But the Eurasia Group analysts said that China had more targeted tools to pressure the U.S. and retaliate against trade measures. Such measures—already used by Beijing against countries like South Korea—could include informal regulatory actions that deny market access to U.S. firms and goods, they said.

Officials at China’s State Administration of Foreign Exchange also recognized that injecting politics into Treasury purchases could backfire, causing a price decline that could damage the value of the country’s own holdings, the analysts said.

SAFE said Thursday that Bloomberg’s report might have quoted a “wrong source,”—read more here.

“We are far more inclined to see a move by SAFE, if confirmed, as a conventional investment decision,” Eurasia Group said. “We don’t rule out the possibility that Beijing will seek to increase yuan flexibility, but the shift in policy will likely be modest and highly dependent on market conditions.”