Post by jeffolie on Mar 3, 2012 10:00:00 GMT -6
China hedge U.S. debt, diversify its holdings
In my opinion, China has few sudden options and many slow acting options for shifting out of Dollars.
" ... moved from having too much money to place to having no new money to place at all. If you don't have more money, you can't buy anything new ... net seller of U.S. treasuries in the second half of 2011... that China is America's banker and America is dependent on financial inflows from China is not true ...
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China hedging its bets on U.S. government debt, data show
The nation's slowing accumulation of U.S. Treasuries suggests it is trying to diversify its holdings and is looking for other places to stockpile its trove of foreign exchange.
" ... 54% of its foreign-exchange reserves as of June 30, according to a U.S. Treasury survey released this week. That's down from 65% in 2010 and a record 74% in 2006.
Beijing continues to buy loads of U.S. debt. As of June 30 it held $1.73 trillion in U.S. securities, up 7% from June 30, 2010.
Still, other federal data show it was a net seller of U.S. treasuries in the second half of 2011.
" ... China, the largest foreign holder of U.S. government debt, has few good options for parking its foreign exchange. Nothing can match the safety, liquidity and size of the U.S. Treasury market.
"There's no substitute," said Liu Baocheng, a professor at the University of International Business and Economics in Beijing. "The dollar remains the dominant currency."
In addition, Beijing knows that a sell-off of its U.S. holdings could weaken the dollar, eroding the value of its investments.
Global demand for U.S. Treasuries has remained strong in an uncertain environment. The yield on the 10-year note fell 0.05 of a percentage point to 1.98% in New York on Friday as investors sought a haven from continued worries about the Eurozone.
"The conceptual framework people have that China is America's banker and America is dependent on financial inflows from China is not true," said Andrew Batson, a Beijing-based analyst for GaveKal-Dragonomics. "The proof is in the pudding. China was buying a much smaller number of U.S. assets and no one even noticed."
Exactly where China is turning for diversification is unclear. Beijing does not disclose where it puts its foreign reserves.
" ... China's trade surplus has narrowed because of rising imports and a strengthening yuan, another reason China's purchases of U.S. debt may be slowing.
China's foreign reserves have essentially remained unchanged since the first half of last year.
"China's previously gigantic balance of payments surplus vanished in the second half of 2011," said Derek Scissors, a Washington-based China specialist at the Heritage Foundation. "They moved from having too much money to place to having no new money to place at all. If you don't have more money, you can't buy anything new."
www.latimes.com/business/la-fi-china-us-debt-20120303,0,1286478.story
In my opinion, China has few sudden options and many slow acting options for shifting out of Dollars.
" ... moved from having too much money to place to having no new money to place at all. If you don't have more money, you can't buy anything new ... net seller of U.S. treasuries in the second half of 2011... that China is America's banker and America is dependent on financial inflows from China is not true ...
===========================
China hedging its bets on U.S. government debt, data show
The nation's slowing accumulation of U.S. Treasuries suggests it is trying to diversify its holdings and is looking for other places to stockpile its trove of foreign exchange.
" ... 54% of its foreign-exchange reserves as of June 30, according to a U.S. Treasury survey released this week. That's down from 65% in 2010 and a record 74% in 2006.
Beijing continues to buy loads of U.S. debt. As of June 30 it held $1.73 trillion in U.S. securities, up 7% from June 30, 2010.
Still, other federal data show it was a net seller of U.S. treasuries in the second half of 2011.
" ... China, the largest foreign holder of U.S. government debt, has few good options for parking its foreign exchange. Nothing can match the safety, liquidity and size of the U.S. Treasury market.
"There's no substitute," said Liu Baocheng, a professor at the University of International Business and Economics in Beijing. "The dollar remains the dominant currency."
In addition, Beijing knows that a sell-off of its U.S. holdings could weaken the dollar, eroding the value of its investments.
Global demand for U.S. Treasuries has remained strong in an uncertain environment. The yield on the 10-year note fell 0.05 of a percentage point to 1.98% in New York on Friday as investors sought a haven from continued worries about the Eurozone.
"The conceptual framework people have that China is America's banker and America is dependent on financial inflows from China is not true," said Andrew Batson, a Beijing-based analyst for GaveKal-Dragonomics. "The proof is in the pudding. China was buying a much smaller number of U.S. assets and no one even noticed."
Exactly where China is turning for diversification is unclear. Beijing does not disclose where it puts its foreign reserves.
" ... China's trade surplus has narrowed because of rising imports and a strengthening yuan, another reason China's purchases of U.S. debt may be slowing.
China's foreign reserves have essentially remained unchanged since the first half of last year.
"China's previously gigantic balance of payments surplus vanished in the second half of 2011," said Derek Scissors, a Washington-based China specialist at the Heritage Foundation. "They moved from having too much money to place to having no new money to place at all. If you don't have more money, you can't buy anything new."
www.latimes.com/business/la-fi-china-us-debt-20120303,0,1286478.story