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Why China increased US debt holdings fortwo straight months? [Copy link] 中文

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Post time 2013-1-26 15:53:58 |Display all floors
This post was edited by sansukong at 2013-1-26 14:57

Why has China increased US debt holdings for two straight months?
(People's Daily Online)                   15:24, January 21, 2013


China increased its holdings of U.S. Treasury securities by 200 million U.S. dollars last November. The country held nearly 1.2 trillion U.S. dollars' worth of Treasury securities by the end of last November, and remained the largest single foreign holder of U.S. government debt, according to a Treasury International Capital report releasedby the U.S. Treasury Department on Jan. 16. China also increased U.S. debt holdings by 16.3 billion U.S. dollars last October, revised data revealed.

Experts said that increases or cuts in China's U.S. debt holdings are normal market behavior, and should not be interpreted politically.

Market demand for U.S. government debt rebounds

Despite the drop in U.S. Treasury yields, most foreign creditors increased their holdings of U.S. government debt last November. According to data from the Department of the Treasury, foreign holdings of Treasury securities rebounded last November, during which foreign governments and private investors bought a net total of 26.4 billion U.S. dollars' worth of Treasury securities, hitting a three-month high. Net foreign holdings of long-term Treasury bonds increased 52.3 billion U.S. dollars last November, after decreasing 1 billion U.S. dollars last October

China and Japan are the largest and second largest foreign holders of U.S.government debt. The U.S. debt held by the United Kingdom and Caribbean countriesincreased the most last November.

China mainly increased holdings of Fannie Mae and Freddie Mac bonds. Data revealed it increased net holdings of long-term Treasury bonds by 894 million U.S.dollars last November.

A breakdown of the holdings showed that it reduced holdings of long-term Treasury bonds by 902 million U.S. dollars, increased Fannie Mae and Freddie Mac bonds by nearly 1.1 billion U.S. dollars, increased holdings of corporate bonds by over 1.2 billion U.S. dollars, and reduced holdings of corporate stocks by 520 million U.S.dollars.

Analysts attributed the rebound in foreign demand for U.S. government debt to the risk avoidance awareness raised by the global economic slowdown and the U.S. policy of quantitative easing.

Gennadiy Goldberg, an economist at TD Securities in New York, noted that theFederal Reserve announced in September that it would buy 40 billion U.S. dollars in mortgage securities each month, which temporarily reduced foreign demand for U.S.government debt. Most foreign investors then turned their eyes to mortgage securities.

Second best option

China, the largest foreign holder of U.S. government debt, started reducing its U.S.debt holdings in 2011 due to the drop in Treasury yields. The country reduced U.S.debt holdings by around 100 billion U.S. dollars in November 2011, and increased or cut the holdings by billions of U.S. dollars in the following year.

"The increase in China's U.S. debt holdings at the end of last year is normal market behavior," said Sun Huayu, a professor at Jinan University's International Business School. "China posted a large trade surplus last year, which increased its foreign exchange reserves."

China's trade surplus hit a three-year high of 231.1 billion U.S. dollars last year, upover 48 percent from the previous year, according to statistics from the GeneralAdministration of Customs.

Haitong Securities noted that the country's trade surplus rose more than expected last year. The monthly trade surplus started in March, and fluctuated around 20 billion U.S.dollars in the following months, higher than the historical average.

Due to safety and liquidity needs, a major part of the increased foreign exchange reserves have been spent on U.S. government debt.

Prof. Sun said that safety overrides returns when it comes to foreign exchange reserves because higher returns mean higher risk. Compared with euro and yen assets and those of emerging markets, U.S. government debt is safer and has higher liquidity. Therefore, it is a second best option for China to increase U.S. debt holdings.


Read the Chinese version: 中国为何连续两月增持美债(热点聚焦)
Source: People's Daily Overseas Edition; Author: Luo Lan



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Post time 2013-1-26 17:40:42 |Display all floors
This post was edited by Revolutionar at 2013-1-26 17:43

The FED Balance Sheet , contrary to what the public thinks, has contracted by 50% since the crisis started in 2008.

the contraction is a result of the corporations, banks  and individuals de gearing, paying down their loans ever since the crisis started.

Inflation risk is near zero. If dont hold US government bond, what else can China hold?

The US government actually has a near unlimited capacity to do some massive Keynesian spending to kick start the economy, without raising inflation risk......as long as those ignorant Republicans are kept in jail.
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Post time 2013-2-5 15:15:34 |Display all floors

RE: Why China increased US debt holdings fortwo straight months?

China to pursue RMB internationalization
Updated: 2013-01-28 10:20                (Xinhua)


DAVOS, Switzerland - China is determined to pursue the internationalization of the renminbi on a market-oriented basis, and will closely watch the spillover effects of Japan's ultra-loose monetary policy, Yi Gang, a vice governor of China's central bank, told Xinhua.Let renminbi compete fairly  "It is the basic policy of the People's Bank of China to let the renminbi compete with US dollar or euro fairly in the international market," Yi said in an interview on the sidelines of the annual meeting of the World Economic Forum Saturday.

In the past, it was not allowed to use the renminbi in cross-border trade transactions and investments. "What we are doing now is nothing but remove discrimination against the renminbi and let it act just as other reserve currencies," he said.On concerns about the potential rise of the Chinese currency, Yi said, "It is just natural that foreigners might have some concerns, but it is not our policy to specifically promote the renminbi, and I hope people of other countries can treat it with calm." "Whether the pace of the internationalization is a little bit quicker or slower, it is always and completely the choice of the market," he added."I would be actually pleased to see people have more confidence in the renminbi and choose it over other currencies thanks to a more sophisticated market, better implementation of China's monetary policy, China's macroeconomic stability and social stability, and stronger rule of law," he said.






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Post time 2013-2-5 15:42:54 |Display all floors
sansukong Post time: 2013-2-5 15:15
China to pursue RMB internationalization
Updated: 2013-01-28 10:20                (Xinhua)


Why has China increased US debt holdings for two straight months?



rat..........................why dont you hold a card outside Zhong Nanahai.............that will be nice.
I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2013-2-5 16:43:35 |Display all floors
sansukong Post time: 2013-2-5 14:15
China to pursue RMB internationalization
Updated: 2013-01-28 10:20                (Xinhua)

Just how much is your pay-check this month for regurgitating all the  {:soso_e174:} your master had shafted into your throat for the last few months?  
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Post time 2013-2-5 17:12:39 |Display all floors
sansukong Post time: 2013-2-5 16:43
Just how much is your pay-check this month for regurgitating all the   your master ha ...

You scolding Xinhua or scolding sansukong?
I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2013-2-7 05:32:05 |Display all floors
Because we're still the safest place in the world to store money, and one of the few that can do so in such large amounts.

Reason being...we have some of the strongest and most transparent property laws in the world and a mature court system.  So when you park a few billion in municipal bonds you can rest assured the government wont seize the underlying asset.  Disputes can be resolved in a court system that is extremely transparent and follows the letter of the law (as in, not subject to judicial "interpretation") than most any other in the world.

In the case of real estate, all property in the USA is clearly defined, right down to the foot measurement at county level (Federal -> State -> County -> City), and all descriptions of property are public record.
Don't tread on me

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