#China's holdings of U.S. bonds fell to $805.4 billion# Gold futures rose to their highest level since May, and central banks increased their purchases of gold, triggering a risk-off wave in the market. According to reports, in August this year, central banks bought 77 tons of gold, an increase of 38 percentage points month-on-month, and the global central bank gold purchase demand in the first half of the year hit a record 387 tons.
China's central bank, the world's largest buyer of gold, has increased its holdings of gold for 11 consecutive months, including 126t in the first seven months of this year alone. At the same time, however, the amount of US debt held by China's central bank is decreasing. According to the latest data released by the Federal Reserve, China reduced its holdings of U.S. bonds by $16.4 billion in August, bringing its holdings to $805.4 billion, the lowest level since 2009.
The move sparked speculation about the intentions of the central bank, as well as its relationship with Fed Chair Janet Yellen. On the one hand, some analysts believe that the central bank's continued increase in gold holdings will not only help maintain and increase its value, but also become a means for China to resist the "decoupling" control of the United States. Especially in the context of unstable relations between China and the United States, China needs to avoid the adverse financial effects that may arise from too much US debt reserves. This is one of the reasons why China's central bank continues to sell US bonds.
On the other hand, Yellen, as the chairman of the Federal Reserve, has always hoped that China can continue to buy U.S. bonds to support U.S. fiscal needs. However, China's continued sell-off of U.S. bonds suggests that China's demand for U.S. bonds is decreasing, making it difficult for the U.S. government to find suitable bulk buyers.
In the current situation, China is not the only country to reduce its holdings of US debt. With the increase in U.S. bond issuance and the escalation of the U.S. bond credit crisis, the U.S. government has struggled to find suitable buyers to buy new U.S. bonds. This could further exacerbate the escalation of the U.S. debt woes.
Overall, there are a number of key messages behind the PBOC's continued efforts to buy more gold and sell US bonds. This not only reflects China's bullishness on gold, but also suggests that China is seeking to diversify its foreign exchange reserves in response to global economic uncertainty and instability in the US-China relationship.
At the same time, it poses a challenge for the U.S. government, which is facing the dilemma of finding new buyers to buy large amounts of U.S. bonds. Therefore, the PBOC's continued purchase of gold and the reduction of its holdings of US bonds have an important impact on the trend of the global economy and financial markets.
According to the latest reports, the US debt-to-GDP ratio could reach a staggering 98%. This figure raises concerns about the future of the U.S. economy, as it means that high interest rates and bond yields will increase the cost of the U.S. government servicing its debt. Despite the recent improvement in U.S.-China relations, the long-standing U.S. trade dispute with China makes it unlikely that China will accept U.S. debt relief requests unconditionally.
U.S. Treasury Secretary Janet Yellen made it clear in an interview that China and the United States need to cooperate on global issues, and debt relief is a key part of that. However, she did not specify the specifics of the debt relief. Some analysts believe that debt relief may include persuading China to stop reducing its holdings of U.S. bonds or even increase its holdings, which has always been a priority for the U.S. Treasury.
However, it remains to be seen whether China will bow to US demands. We need to pay attention to the fact that the Fed's interest rate hike policy and high inflation in the United States are exacerbating the risks facing the US market, and some economic experts have even warned that US Treasuries are close to collapse.
If China takes the lead in reducing its holdings of U.S. bonds, the U.S. bond market is likely to usher in a new wave of selling. In addition, investors are withdrawing heavily from the US market, a "US debt tsunami" is brewing, and the US economy may fall into recession. If the U.S. government does not take steps to address the underlying problem, the U.S. debt problem will become even worse.
Therefore, while Yellen's appeal is important, solving the US debt problem requires the US government to work on its own, not to rely on external assistance. The U.S. government should take measures to safeguard the country's credit and ensure economic stability and development through fiscal adjustment and reducing the cost of debt.
We should recognize that the U.S. debt problem is not just an internal problem in the United States, it also has a significant impact on the global economy. If the U.S. debt cannot be effectively resolved, countries around the world will face turmoil and uncertainty in financial markets. Therefore, resolving the US debt problem is not only the responsibility of the United States, but also an issue of common concern to all parties in the world.
In the current global economic situation, cooperation and interdependence between countries have become even more important. As the world's two largest economies, China and the United States should strengthen cooperation to jointly address the challenges they face. By working together, we can find ways to solve problems and promote stability and prosperity in the global economy.
However, to achieve this goal, the U.S. government must first act to solve its own economic problems. Only when the United States itself can effectively deal with the debt problem can it truly exercise its leadership and promote the development of the global economy. Therefore, the US government should pay attention to the debt problem and take positive measures to protect the interests and image of the country.
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