Posted on 12/17/2008 12:43:43 AM PST by TigerLikesRooster
China increases US treasury holdings
By Xin Zhiming (China Daily)
Updated: 2008-12-17 07:14
Comments(8) PrintMail
China increased its holdings of US treasury securities by $65.9 billion in October, consolidating its place as the No 1 holder of American debt, according to the Treasury's latest report on international capital flows.
It was China's largest monthly increase this year, pushing the country's total holdings to $652.9 billion, compared with $587 billion at the end of September, when it replaced Japan to become the top holder of US debt.
The continual increases in US debt holdings in recent months have triggered fierce domestic debate, as the country has channeled almost a third of its $2 trillion of foreign exchange reserves into US treasury securities.
Wei Weixian, economist with the University of International Business and Economics, believes it "is a fairly acceptable option".
With US treasuries recently gaining investor favor, their yields have been on the decline; but in the long term, they are still a relatively safe investment for China, Wei said.
"Despite the financial crisis, the US economy remains the strongest, providing back-up for the treasury securities," he added.
He also pointed out that China does not have many options to deploy its massive amounts of foreign exchange reserves.
For example, China pulled $200 billion out of its foreign exchange reserves to set up China Investment Corporation (CIC) to diversify investment, but CIC has incurred heavy losses in its investment in the US private equity firm Blackstone due to the tumbling international financial markets. CIC has since said it would be more cautious in investment abroad.
Guo Tianyong, economist with the Central University of Finance and Economics, also believes the US treasury debt has relatively low risks and good liquidity.
(Excerpt) Read more at chinadaily.com.cn ...
Nice work, Hank! /sarc
Ping!
Again, they got screwed. In Oct and Nov, the USD has been at its highest level exchange rates-wise compared to all major currencies barring the JPY. They’d have done better to park their funds in EUR or GBP or even AUD I guess. All these currencies are recovering the ground they’d lost earlier.
I guess that explains why they’re looking to devalue the CNY against the USD in recent times - to regain some notional value in respect to the CNY.
Maybe China has goals other than making money with their foreign currency reserves. Just a thought. Great Powers aren't private investors.
Outstanding.
The United States is owned by Communists.
About last June, '07 they saw the euro at historical highs and decided that was where to put their bucks.
yitbos
Your right! They don’t need to make money for what they are looking for! Pretty soon they will have us where they want us!
China and Japan are going to be ROOTED if America ever defaults on its loans...
...and they are going to be very, very upset, too!
>China and Japan are going to be ROOTED if America ever defaults on its loans...<
Default????? That’s something third world countries do. It could never happen......ummmm.....errrrr....ahhhhh....ooops.
China’s grand goals aside, they themselves need to survive as a regime. Bad investments will leave them little money for other grandiose schemes.
The Chinese have a herd mentality. They flock to where the crowds are and they get burnt in the process. Very often, they decide to make a switch when it is too late. The CIC could have taken off much earlier. They decided to create it only when the stock markets were already very high. Same with pretty much everything else. Which is why they’re not great innovators. They hate risk but risk finds ways to materialize for them.
Could happen in a different way. What if the Chinese went to war with an American ally. A very effective way of keeping the Chinese god on the leash is to tell them “ok well! if you invade say Taiwan, we will not only come and liberate them but we will make you pick up the tabs for our war effort against you as well as grant the Taiwanese as much post-war reconstruction funds as they want you’ll bear the costs.
For China, no war is worth a Trillion dollars :-)
god = dog
What a marvelous example of the adage:
‘When you owe the bank a million dollars and cannot repay it, you are in trouble, but when you owe the bank BILLIONS of dollars and cannot repay it then the bank is in trouble”
They have loaned us so much money at this point they have no choice but to either keep lending us or else watch all they lent us before become worthless.
Sounds like you're saying that it's bad to sell T-bills to China, that China shouldn't own more than others, and that it's Hank's fault. If that's what you're saying, why?
Looking back, maybe we should have let them remain a closed society...
In the first place, China does have choices and they won't throw 'good money after bad' if it doesn't suit them. In the second place, T-bills are the safest place for money; you know it, I know it, and they know it.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
-~~Ludwig Von Mises
It’s only paper...............
Perhaps the entire increase in value is accounted for by the falling interest rates, the effect of which easily dwarfs exchange rate changes. But that’s a bubble too . . .
What other choices do they really have? Let’s face it, if America really tanks and defaults then the paper held by the Chinese and others is worthless.
My analogy is good and I’ll stand by it. We owe the Chinese so much money at this point that a default on our part would ruin them and they know it. They have no choice but to stay with us AND even buy MORE paper in order to keep their previous purchases from becoming worthless.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.