After a month, China sold US bonds again, and the US Treasury: put China on the "watch list"
A few days ago, the US Treasury Department released the latest international capital flow report, Chinese mainland once again reduced its holdings of US bonds, holding a total of 868.9 billion US dollars, the same level as in November and December last year. U.S. Treasury Secretary Janet Yellen realized that the dollar's status was declining and called on China and the United States to strengthen cooperation, saying that it was beneficial to the development of both sides.
The month before, China ended a seven-month streak of underweights, adding $20.5 billion in U.S. debt. But a month later, the wind changed again, and China reduced its holdings of U.S. bonds again, although only $400 million, but this also represented China's pessimistic view of the US economy.
Previously, the US debt crisis was almost on the verge of thunderstorm, and the US treasury could not afford to pay the interest on US debt, and once the US debt defaulted, it would deal a great blow to US credit. The hegemony of the dollar is based on the national credit of the United States, and once the credit of the United States is damaged, the process of "de-dollarization" may accelerate. However, just days before the imminent default on the US debt, the Biden administration and the Republican Party agreed to pass a bill that suspended the US debt ceiling until early 2025, successfully avoiding an economic crisis. However, adjusting the dollar debt ceiling did not eliminate the crisis, but let the crisis snowball bigger and bigger, and if Biden is not re-elected, then the US debt problem will be handed over to the next government to worry about.
After adjusting the ceiling of the US debt, the US debt has continued to grow, exceeding $32 trillion, reaching the highest size of the US debt in history. Rosneft President Sechin said that in the past 30 years, the US debt has increased from 3 trillion to 32 trillion, soaring 10 times, but the US economic growth rate can not keep up with the growth rate of the US debt, the United States needs to pay interest accounts for one-fifth of the national budget every year, and the US debt risk is all passed on to the major US debt holders, posing a potential crisis to Asia-Pacific countries.
The US debt issue has become the sword of Damocles hanging over the head of the United States, and under the wave of "de-dollarization", only China has the ability to help the United States. A few days ago, at a hearing in the US Congress, US Treasury Secretary Yellen said that there is no substitute for the dollar, but she also admitted that the dollar's status as a global reserve currency is declining. As the world's two largest economies, China and the United States have highly complementary economies, close trade ties, and the development of bilateral economic and trade cooperation is beneficial to the development of both countries, and is more conducive to promoting global economic growth and injecting more stability and positive energy into the world economy.
Yellen stressed the importance of trade and investment with China, saying that only by working with China can we meet the global challenges that lie ahead.
Whether Yellen's remarks are from the heart is difficult to say, but the recent behavior of the United States is really difficult to trust. The United States has imposed sanctions on Chinese companies for various reasons, restricting and hindering the overseas development of Chinese enterprises, presumably the US Treasury Secretary is also very clear about the reason, but she has not prevented the United States from undermining Sino-US trade relations. When you really encounter difficulties, you jump out and praise China without pain and reach out to help, and China is not so easy to deceive.
After China reduced its holdings of U.S. debt again, the U.S. Treasury announced that it would add Chinese mainland to the "currency manipulation watch list," along with Taiwan, Germany and Singapore. The U.S. Treasury claimed that "the exchange rate mechanism lacks transparency" because Chinese mainland did not publish information on "foreign exchange intervention."
U.S. Treasury Secretary Yellen said that the way U.S. trading partners intervene in foreign exchange is basically based on selling dollars, and although economic resilience is not weak, global market insecurity is still increasing.
According to Yellen's meaning, it is to blame China for not notifying the United States in advance when to sell US debt, and China's behavior of selling US debt again makes the United States feel a little flustered. It seems that China has hit the United States in the soft underbelly this time.