Topic: CHINA WILL CUT HOLDINGS OF U.S TREAS FROM CURRENT ABOVE $1T TO ABOUT $800B (Read 347 times)

Rather than the interest levels, I guess the Chinese are more worried about sanctions. If the Americans can impose sanctions over Russia, then what prevents them from doing the same to China? I don't have much details about their reserves. Only recently they admitted that they are increasing their gold reserves. Officially, they are holding less than 2,000 tonnes. But I am not sure whether we can trust them on this.

That twitter link in the OP is useless and doesn't convey any details about the story so here is a news article about this: https://www.reuters.com/article/us-china-economy-treasury/china-may-dump-u-s-treasuries-as-sino-u-s-tensions-flare-global-times-idUSKBN25V179


You got it the wrong way around. Treasuries are like bonds and stocks whose value can go down if there is a big dump sale, and go up if there are many buyers. Treasuries are not only debt owed to other countries but they are a liquid asset which the dollar can be backed by, giving the dollar more purchasing power, and the US can then put more money in their economy with the sold Treasuries which eventually find their way to normal people and businesses.

What do you think will happen if a whale dumps it's entire bitcoin holdings? The bitcoin price will crash with respect to other (crypto/fiat) currencies. Similar situation will happen if China sells all of its Treasuries at once one day, the dollar price will crash and there will be less money in the economy, because the purchasing power of the dollar goes down. Everyone holding US dollars loses, which is pretty much the whole world. Not only the US economy but also all other economies (including the global one, and even China) will be in turmoil. So instead China sells its Treasuries little by little which still has the negative effects of what I just said, only much less severe.

Nobody wants China to sell its huge amount of treasuries, because so many institutions around the world are also holding them and will feel the impact. Even China knows this is suicidal for their own economy but here we are with Trump and his stupid trade war initiative with China that nobody supporting free trade agrees with...

You control food, you control people, you control the energy you control the country, you control currency you control the world, and you control health you control life. Although America is not a large producer of agricultural products, America remains a price maker, not a price taker. America controls and controls the world price of food holdings by intervening in the management of other countries and even by manipulating it.


In the end, it's all about money, the competition between China and America is heating up because the current Chinese and American leaders are both nationalists. In the previous era, China became America's strategic partner, but in the Trump era, China became America's competitor. Although the ideologies of the two countries are contradicting each other, the current rivalry between China and America began when Xi Jing Ping wanted to terminate the agreement between Reagen and Deng Xiaoping regarding democracy in China. Reagan is a Trump idol. This is what sparked tensions between America and China.

For China itself, China feels that it is a big country as one of the centers of world civilization besides that there have also been bad experiences in the past due to colonialism and a desire to seek revenge. But despite all that, China has plenty of stomachs to feed, so its leaders must ensure food, economic, and political security in order to maintain domestic stability.

It's about nationalism and national pride to an extent, but mostly about self-determination.  China cannot become a world power if it cannot be the preeminent regional power in Asia.  The United States understands this, and this is why we prop up competitors and rivals to China's preeminence.  Vietnam, South Korea, Japan, the Philippines.  Our military and economic aid to all these countries is designed to keep China from projecting power outside of their immediate sphere of influence.  This is also why we keep challenging them in the South China sea.  The US is trying to prevent them from challenging US on the global stage by creating regional roadblocks.  China wants to overcome those for the same reason - projecting power globally. 

As for why, both sides' style of government is a threat to the other.  China is authoritarian and keeps power by suppressing freedom and controlling information.  An open and free style of government is a threat to those who hold power. In the US, the spread of an authoritarian government to other areas of the globe is a threat to our freedoms.  We cannot allow ourselves to be in a position of weakness against a ruthless country that would oppress its own people; what do you think they'd do to foreigners?

It is not awesome for USA because when China is selling these bonds they are actually showing the world how worthless it is and how its value dropped, it may not be a financially wise situation but it is great politically.

Let's say you give bill gates a loan, obviously why would bill gates a loan from you personally but let's just go with the example but then you say to people that bill gates owes you 100 dollars and you do not want to wait around and give them the loan rights for 80 dollars, they will make 20 dollars profit if they wait and you get your money right away, this tells the world that you are not sure if bill gates will pay or not and you do not want to wait and drops bill gates credibility. Same here, china not wanting to wait equals USA losing economical credibility.

The Chinese government is really trying to start a trade war against the US. China is currently quite bossy and not at all friendly with any country, they are nurturing a conspiracy to dominate the world and this should be suppressed from now on. for this Chinese plan, they were wrong. The United States may be scarce in terms of agricultural products, but it can certainly import produce from other agricultural countries at cheaper prices. Doing so only damages China's economy and they are making the surrounding countries more hostile.

China liquidates all the US dollars it holds because the world uses dollars. To my knowledge, China is not yet the biggest US creditor. It is the FED, the social security funds, and the American people that are America's largest creditors. Selling Chinese dollars is just a small wave in the market.
Then the tax policies will increase with China and they will see where they are in the war.

Very well said. The value of dollar has been on a decline over the past months compare to its previous value during last year. Indeed, holding the bonds they’ve invested upon can be a great loss to them because of the depreciating worth of fiat.

Maybe that’s why China is deciding to cut their holdings from US Treasury Bonds. They already have the gut feeling it’s no longer safe and dependable investment. Most likely they would resort in buying gold which has an increasing value as years goes by. Because compared to T-bonds, golds is way much safer from hyperinflation and from market crash.

This is something awesome for USA, they would prefer China not to hold any treasury bonds at all, probably zero if they could even do that, they would rather buy them out directly without having any problem. Obviously first thing they need to do is being less dependent on China, as long as you keep racking up new debt to them, there is no point on paying all of it today, if you want to cut ties forever you need to also build stuff somewhere else (and there are other cheap places as well) so that means if USA wants out, they need a long term plan.

What could China gain from this? I have no idea but short term money that they could spend, liquidity is a very important thing but I am not sure if losing money long term for a short term gain could be beneficial for them.

I think this is a rather wrong decision by the Chinese government. The US is a powerhouse of heavy industry but they choose to oppose the US with agriculture, they do not know that there are many countries around that want to cooperate with America on agriculture. this only causes damage compared to China in the long run, and it will not affect the US economy much. This has officially made clear the Chinese retaliation, they will soon pay the price for their tricks.

I do not understand the economical warfare situation between the big world powers. I mean they are already big, they are already doing well, they really do not need to fight each other at all, they could simply live a great life without any problem at all.

Why do they insist on making things worse for themselves? Don't get me wrong I am not saying they should be friends and patting each others backs, but China and USA helping each other could mean both of those nations could be even better in financial situation but also politically as well, getting those two nations friendlier would mean votes for whoever does it (well for USA, china is a dictatorship). In any case, if they want to do that, they can do that, it wouldn't matter to me, they fighting means they will want allies.

No problem, China is not yet the biggest creditor in America. They only account for 8% of the total US debt, still small compared to the Social Security Funds and the Fed. If China dumps all the money they hold, it does not affect the dollar much.

Russia added around 1,300 tonnes of gold to their reserves during the last six years. The figures from China are not available, as they are not transparent in these aspects. My guess is that they are turning to gold because no amount of sanctions and embargoes can impact the gold holdings. That is not the case with holdings of United States Treasury Bonds. Anyway, rise in gold prices have been immensely beneficial for these two countries.

I don't think this is about disputed territories and China being aggressive to other nations at all. Even if China adds more money on the US pot today all while bullying other nations in which US has keen interests on, the US would still compete with them on border issues and protecting other nations whenever possible since these nations are where they are getting the most benefits from. China and Russia have been interested in gold bullion for some time now due to it being the best possible investment for the money, and perhaps that's where some of China's money went after pulling out some $200B on US treasury bonds.

If this is the reason then they are supposed to convert everything right, so they are just doing it like a warning to USA so they won't take retaliatory actions against them with border issues of other nation especially the South China sea issue.Trump is not going to leave the Chinese to do the things as they wish as long as they are having enough power to execute it.

But, but....
Isn't a weak dollar helping exports and hurting imports? Exactly the opposite picture for a strong yuan in an economy such as China which relies on exports? So, a weak euro and us dollar aren't actually bad news for China, which might want to again work on their manipulation rates and drop the fx rates again?


No, it's not, a simple google search will tell you more than enough.


Wait till the elections are over, no matter who comes into office they will have to get the printing at triple speed, they can flood the market at any time with sums compared to the entire GDP of China, and as ussual, it's the rest of the world that is going to be hurt more than them, like in 2008 when poeple across the globe who couldn't spell mortgage or had no idea where washington was on a map lost eveything.

all that money may not tank US economy but it will harm it a little bit and not to mention that the money doesn't just evaporate but it will go back to China and will be invested in Chinese economy strengthening it more.

with the world economy in a disastrous state because of the widespread of the virus and the US printing a lot more money than normal, we are headed for devaluation of US dollar one way or another.
with all the wards that Trump has been starting all over the world things are getting even worse. we could be headed to repetition of 2008 but this time instead of banks it will be caused by Trump...

US dollar has already lost some of its value but it is not noticeable because other fiat currencies in the world are not having a good time either but it will show itself in form of inflation.

Currently, China is the largest creditor of the US and they have done so to enjoy preferential treatment from the US government. Currently, the US is putting a lot of pressure on China, the trade war, and several new decrees from the US are killing Chinese businesses. The act of threatening to sell off US dollar bonds is a threat to devalue the dollar. Damage to the dollar will soon be visible.

I would say they really need it, they could sell as much as they can, they could sell them all if they want to, it is not really a big deal for USA and it is really not a huge deal for China neither. You do realize that these are all countries with unlimited power right?

China could print enough Yuan to buy 1 trillion dollars total, and not really get hurt, try something like that in smaller countries, like lets say Taiwan for example and you are ruining the whole finance of the nation, do that in USA or China and nothing happens. Hell USA just printed out 4.2 trillion dollars in 2020 alone, you think they would be worried China selling their treasury bonds? They wouldn't care about it at all. Obviously it is sending a message, but that's it, nothing impactful other than a message.

I don't think that they are considering this as a retaliatory measure. Perhaps they are afraid that the Americans will impose some form of sanction or embargo, which will make these bonds completely worthless. IMO, rather than retaliating against the Americans, this is the main intention for getting rid of the treasury bonds. They may be moving their reserves to gold or other safe assets (which are not impacted by the sanctions).

Yuanization and dedolarization are just bluffs without any meaningful action. If China releases US bonds, under current conditions the US cannot possibly pay. If the US prints new debt to repay a debt to China, the value of US bonds will fall on the market and the yield will be higher. then the dollar value will fall. So that US companies have difficulty getting investment funds in the market. On the other hand, the RMB currency will strengthen further so that the cost of production in China is high and reduces the competitiveness of Chinese goods in America. The ending is the threat of layoffs in China.

In fact, China is bluffing but still holding US bonds by continuing to print RMB to buy dollars, with this trick, the RMB is devalued and the dollar strengthens which is certainly beneficial for China because the price of Chinese products is increasingly competitive and money continues to rotate in China. So it can be concluded, there is a symbiotic mutualism between China and the US, China helps America to print money by owing it to China.

https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124
https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355

Is this news confirmed because I did not find it in the headlines?
Reducing TREASURIES by 20% in one year is considered very high, but what is the reason?
The trade war is still cold, and neither side has used the policy of maximum pressure. It will also be a tool to force the other side to make concessions that make the negotiating position better.


If the trade war between the two countries intensified, we may witness the use of some pressure cards, but I do not think that the countries will go far in this, most likely it will end with the banning of some companies.

Almost all the major economies used to hold huge quantities of United States treasury bonds, as these were considered as the most stable investments using fiat currency. If I am not wrong, Japan is the largest holder of the United States treasury bonds. I am not sure about China, but they used to be at no.2 position. Now they are taking steps to reduce their holdings.

If China holds US bonds, the US is doomed, they will all be slaves of China.
If China sells US bonds, the US is doomed, the de-dollarisation is the end of the US.
If a bear takes a dump in the US, the US is doomed, even bears are shitting there, if a panda drops a dump in China, oh, a sign of good luck!!!

Even if the unemployment would turn negative, the debt will be erased, the GDP would grow 100% a day, and the US the only country left on the surface of the earth and people would still talk about how this is bad for them.

Also, in 2016 Japan held 1.13 trillion of US bonds, now it has 1.26, so....nope!


Quite the opposite, decreasing their holdings makes them irrelevant, like a guy with 1mBit wanting to crash the price on binance.

Do you not recognize the folly of premise a belief or economic view on something that you don’t know happens? If you have any evidence to suggest the Fed loans free cash to foreign banks, that’s one thing. But you’re just throwing unsubstantiated ideas out into the ether and then using that to conclude something isn’t right (in this case, the lack of reciprocity.)

China, russia, japan and others have implemented "US de dollarization" policies over the past 10+ years.

They've drastically reduced holdings of US bonds, dollars and debt. The federal reserve is now the largest holder of US bonds.

Its not the most equal relationship in global affairs, seeing as how the federal reserve (probably) loans free cash to foreign banks to stimulate foreign economies. While foreign nations are unwilling to do the same for the united states.

Exactly! China is most likely buying gold or gold mine shares as Warren Buffet does. I am surprised China still held so many US treasury bonds after USA showed as so unreliable partner over last few years. Well at least the were not increasing the amount as they did in years before.

is it the chinese way to beat US as biggest country in the world. they started economic war to US and continue previous conflict.USA should worry with china condition in few year ago, they show good growth in any field especially in economic and military side. many strategy issued to hold china growth. but no one could do this.

China is becoming more and more irrelevant because the Fed will buy as many treasuries as is necessary now. Whether or not that will lead to the rampant inflation everyone soon and gloom’s about is yet to be seen. It hasn’t so far after all.

Personal note, posting in all caps makes you look like a loony, not someone to be taken seriously about anything. Are you the person who runs that forex twitter? Cuz every tweet is written in all caps as well. 

One thing of note is that whatever decision each country is taking in this trade war, there is nothing permanent whatsoever. The same government that would probably swore that they will not have anything to do with a particular country or tribe will still call them to a round table discussion when things change or when another party with different ideology takes over.

My concern is the number of people that would be burnt because of these decisions among countries and nothing will be done to make them whole even when the table turns. So, if China should reduce the holding of US treasury, its just sending a message that we could crash it if we wanted to, it depends on the level of cushions that they themselves have put in place.

Interest rate yield for the United States treasury bond has gone well below the inflation levels for USD. So holding these bonds can actually result in a net loss for the investor. Gold has proved to be a much better alternative, and it's price has increased by more than 60% since the last three years. The central banks of China and Russia have shifted more to bullion these days.

Don't be so sure about that.If Joe Biden becomes president,the relations between USA and China might change.Biden will try to stop the trade war and end the "cold war" that was started by Trump.
China will sell US government bonds for 200 billion dollars and invest those billions in it's own economy,I guess,which isn't that bad for Xi Jinping.The Chinese want to be more independent from the US dollar and from their giant export of goods and services towards the USA,so that's why they will try to increase their export to other countries and focus on increasing their domestic consumption of goods and services.

Good! This won't affect US economy much but this way China will slowly be cut out of the world under the current rule of the dictator leader Xi Zinping. Since last couple of years, China has been showing its ugly face to the rest of the world through. All its neighboring countries like Hong Kong, Taiwan, India are facing the heat of such nasty mentality of China and now the world is fighting back. From trade freezing to Chinese application ban, world is slowly taking measures to curb Chinese expansionist mentality.

The world trade is still dominated by US and its allies, so if China tries to do something drastic, it will harm the Chinese businesses only. Not immediately but in long run! China is now considered as biggest threat to the world peace.

CHINA WILL FURTHER CUT HOLDINGS OF U.S TREASURIES FROM CURRENT LEVEL ABOVE $1 TRILLION TO ABOUT $800 BILLION - STATE MEDIA

source https://twitter.com/Fxhedgers/status/1301603409817030656