On Tuesday (December 19), local time, the U.S. Department of the Treasury released the International Capital Flows Report (TIC) for October 2023. According to the report, China's holdings of U.S. Treasury bonds fell by $8.5 billion in October from the previous month, marking the seventh consecutive month of reduction, and the total holdings fell to $769.6 billion from $778.1 billion in September, the lowest since 2009.
It is worth mentioning that this is also the second wave of "seven consecutive declines" in China's U.S. bond holdings in just 15 months.
In fact, as of February this year, China's total holdings of U.S. bonds have hit a new low since May 2010 for seven consecutive months. Although in March, China once increased its holdings of U.S. bonds, but in hindsight it is clear that this is only a "small episode" in the overall process, because since then China has quickly started a new wave of U.S. bonds, and by October, it was another wave of seven consecutive declines.
In terms of other U.S. overseas "creditors," Japan remained the largest overseas holder of U.S. Treasuries in October. Japan's U.S. Treasury holdings for the month were 10982 trillion US dollars, an increase of 11.8 billion US dollars from September, temporarily stopping the momentum of the previous three consecutive months of ** US bonds. In September, Japan had its largest monthly record for U.S. debt since April.
Overall, among the top 10 overseas "creditors" in the United States, four countries** and six countries increased their holdings in October. **Camps include China, Luxembourg, Belgium and SwitzerlandThe overweight camp includes Japan, the United Kingdom, the Cayman Islands, Ireland, Canada and France.
Add ** note, no more than 140 words (optional) If it is to cover all overseas "creditors", the size of the overall U.S. Treasury held by foreign investors in October, up from 7$604 trillion fell to $7$565 trillion, the second month in a row**.
Our country's ** is more like a passive type of buying new debt after the old debt matures**. This year is the peak of U.S. debt maturities. Especially in the next 12 months, there are about 8$2 trillion in debt is due, or about one-third of total outstanding debt. At the same time, the U.S. federal deficit is expected to be no less than $2 trillion. Superimpose the expiring 8With $2 trillion in U.S. bonds, the U.S. needs to issue about $10 trillion in new bonds to achieve the goal of "borrowing new debt and paying off old debt" and meet fiscal spending needs. The peak of the maturity of old bonds, coupled with the fact that new bonds will not be purchased after the maturity of old bonds, will further reduce China's holdings of U.S. bonds in the following November and December.
On the one hand, the Fed's interest rate hike has led to a decline in U.S. bonds**, and the negative valuation effect has led to a passive decrease in China's holdings of U.S. bonds. On the other hand, the continued interest rate hikes in the United States will lead to a large return of dollars to the United States, in order to maintain the relative stability of the exchange rate, the settlement in the normal international ** needs to supplement the dollar. In addition, since the conflict between Russia and Ukraine, whether the United States directly freezes Russia's dollar assets, China and the United States have now entered the confrontation channel, whether it is the dispute with the Philippines in the South China Sea, or the Taiwan Strait issue, behind it is the United States disgusting China.
For the United States, China's ** US bonds are not very unacceptable, after all, at the juncture when the two parties shouted that the US bonds defaulted, at that time, US bonds were second only to **, the most popular financial products that the market was willing to buy. Moreover, the main target audience of U.S. debt is actually the American people. According to the data, 70% of new U.S. bond issuance in the United States since 2023 has been purchased by American households.
However, what the United States cannot accept is that China can spend the dollars in its hands to buy high-quality assets in the world, so as to diversify the allocation of foreign currency assets and diversify risks. The purpose of the U.S. interest rate hike is to blow up economies outside the United States, so that in the interest rate cut cycle, the additional U.S. dollars can be replaced with high-quality minerals, ports, etc., but after raising interest rates for so long, the inflation rate has not dropped to the expected 2%, and two or three small fish and shrimp have been exploded. Although Argentina has embraced such a total dollarization, it simply cannot satisfy the appetite of the United States. China has also seized the opportunity to exchange dollars for overseas assets, which is unacceptable to the United States.
The struggle between China and the United States must be all-round and all-field, the political level is in the South China Sea, the military contest is already going on in the Taiwan Strait, and the economic field is also in the midst of open and secret struggle.