China, Japan and the United Kingdom, the three major overseas buyers of U.S. Treasuries, performed very differently in October, with Japan and the U.K. regaining their holdings, while China did the opposite, not only selling U.S. bonds for seven consecutive months, but even increasing their holdings**. As the world's second largest economy, China's move has undoubtedly set off a storm in the global financial market. So, in the context of global economic instability, what are the knock-on effects?
China has sold off US bonds for seven consecutive months
According to the reference news network, China's holdings of U.S. bonds have continued to decline in the past seven months. According to data released by the U.S. Treasury Department, as of October 2023, China's U.S. debt holdings have fallen to $769.6 billion, $8.5 billion less than in the previous September. What's more, this is the seventh consecutive month in China, and the size of open interest has hit its lowest level since May 2009.
China has sold off US bonds for seven consecutive months
In fact, since April 2022, China's holdings of U.S. bonds have been below $1 trillion, and by October 2023, China's holdings of U.S. bonds fell by $97.5 billion from the end of 2022, a decline of 112%。
Since the end of 2013, China's holdings of U.S. Treasuries have fallen by about 34 percent, according to those involved, a trend that has developed over the past decade. Especially after 2022, the valuation effect triggered by the US debt has led to China's further acceleration of the US debt, which is more of a passive reaction.
It is worth noting that while China has taken the lead in US bonds, the UK and Japan have chosen to increase their holdings of US bonds. Some time ago, the United States was stretched to the limit because of the debt ceiling issue. In order to smooth out these debts, the U.S. Treasury began to frantically issue more U.S. bonds, which attracted many overseas buyers, including the United Kingdom and Japan, because of the attractive interest rates. However, compared to a prudent investment policy, this interest is not attractive to China.
Fed. 2,226 tons** were shipped back
At the same time, the Chinese side has not forgotten to increase its reserves. According to public data, as of the end of November, China's ** reserves have reached 71.58 million ounces (about 22.26 million4 tons), up 380,000 ounces (about **10.) from October77 tons). China's ** reserves have achieved "13 consecutive increases".
This action not only reflects China's pursuit of diversification of foreign exchange reserves, but also reduces its dependence on the US dollar, thereby countering the potential risks posed by US dollar hegemony. What's more, the increase in reserves also enhances the credibility of the renminbi and its attractiveness as an internationally traded currency. To some extent, this is also a move by China to promote the cross-border use of the renminbi.
*。It is not difficult to see that China has shown two major trends in its economic strategy: on the one hand, through the United States bonds, the risk of asset depreciation caused by the United States bonds has been avoided;On the other hand, by increasing holdings**, the diversification of foreign exchange reserves has been strengthened and the security and stability of the national economy have been protected. This phenomenon also indicates that China may further reduce its dependence on the US bond market in the future, and devote more energy to the holding and management of other asset classes such as **.
In fact, China is not only for its own sake, but also for the stability of the global economy. For a long time, the United States has used the hegemony of the dollar to harvest the wealth of other countries, especially those that aspire to stable development.
The U.S. financial timing nuclear bomb may be detonated
As the saying goes, the house leak happened to rain overnight. Recently, the U.S. Department of the Treasury released its monthly statements for November. The report shows that in November last year, the United States experienced an unprecedented increase in the budget deficit, reaching $314 billion. Relative to the same period the previous year, the huge deficit figure was still 26% higher, despite a 9% increase in revenue. This figure can be seen as a concentrated reflection of the federal ** deficit for the first two months of fiscal year 2024, which is 3,805$800 million.
New York Stock Exchange.
Some attentive people found that the estimated total net borrowing of the United States from October to December has reached $776 billion, and the amount of borrowing is expected to reach $816 billion from January to March next year.
Behind these figures, however, is that in a high-interest rate environment, the value and status of U.S. bonds could be threatened by both large debt and growing interest payments. This has already caught the attention of many investment banks on Wall Street, who have even warned that the United States could fall into a debt crisis again. In recent months, the downgrade of the US credit rating has also further exposed the risk of a debt crisis. It has to be said that as the world's largest economy, the fiscal deficit and the expected debt crisis of the United States will undoubtedly have a profound impact on the global economic pattern.
U.S. Treasury Secretary Janet Yellen.
In this case, the US side has once again set its sights on China. Recently, U.S. Treasury Secretary Janet Yellen revealed that she hopes to visit China again to communicate on key economic issues, and also called on China to change its economic policy.
In this regard, China's spokesman Wang Wenbin said that China believes that the development of healthy and stable China-US economic and trade relations is beneficial to China and the United States, as well as to the world, and China is willing to work with the United States to uphold the principles of mutual respect, peaceful coexistence and win-win cooperation to promote the healthy and stable development of bilateral economic and trade relations. The meaning is very clear, China's economic policy, it is not the turn of the US side to point fingers here.