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"China's current holdings of U.S. Treasury bonds have reached a 14-year low." Recently, the United States has made great moves in the military and political fields, and at the economic level, China has continued to reduce its holdings of U.S. bonds, and the United States seems to be experiencing a "recession wave". What happened to the U.S. bonds, which were guaranteed by the credibility of the United States?
According to the Korean media "Seoul Economy", as of the end of August this year, China held a total of 805.4 billion US dollars in US bonds, a decrease of about 16.4 billion US dollars from the previous month, achieving five consecutive months of reduction and hitting a new record low since 2009.
China has been reducing its holdings of U.S. debt by about 40% over the past decade. At present, the country with the highest number of U.S. debt holdings is no longer China, but Japan, and Japan is also reducing its holdings of U.S. debt in general.
The South Korean media even bluntly attributed the problem to Sino-US relations, believing that the United States' attitude towards China is unstable, especially the policy of containing China, such as clamoring for "decoupling" from China and sanctioning China in the field of chips, so that China chooses this way as a tough response to the United States.
The more China sells its U.S. bonds, the more bond prices fall, and the U.S. government's interest burden will increase significantly against the backdrop of rising Treasury yields. The United States is worried about China's reduction in its holdings of U.S. bonds, and as the second largest holder of U.S. bonds, China still plays an important role in stabilizing U.S. bonds.
If China's foreign exchange reserves are no longer in favor of U.S. Treasuries, it will exacerbate the sell-off in U.S. bonds and make the U.S. government's finances even more strained. It seems that China is carrying out an economic "counteroffensive" in response to the US policy of containing China.
According to media reports, China's central bank has increased its gold holdings for 11 consecutive months, expanding its gold reserves. It can be seen that in order to ensure the preservation of foreign exchange, China not only reduces its holdings of U.S. bonds, but also increases its holdings of gold to ensure the stability and safety of foreign exchange.
But in fact, China's lead in reducing its holdings of U.S. bonds is not a product of the game between the two countries, but is rooted in the U.S. bonds themselves. The South Korean media's one-sided interpretation of the reduction of U.S. debt holdings as a confrontation between China and the United States is biased.
It is not only China that is reducing its holdings, but other countries are also reducing their holdings, which shows that it is not a problem of Sino-US relations, but that the safety of US bonds is no longer tested. Even without China's participation in the reduction, the risks underlying US bonds continue to grow.
Since the time of the Russia-Ukraine conflict, the United States has shown hegemony at the economic level, including freezing Russia's $300 billion in foreign exchange and directly driving Russia out of the international fund clearing system. The actions of the United States are dangerous, and in order to achieve its political intentions, the United States will do everything to achieve its political intentions, including various economic sanctions.
The original United States was high above the world, acting as a referee in the international financial order, and the dollar represented "authority". And now, the referee is angry and ignores financial rules to sanction other players, which has also caused panic in more countries.
Like Japan, it blindly turns to the United States in the political and economic fields before it dares to hold a large amount of US debt. And those countries that vacillate on the "pro-American" issue, or those who want to stand alone in the great power competition, are afraid that the United States will turn the other cheek and use US debt as a means of sanctions.
It is precisely the "economic sanctions" pursued by the United States for a long time that have made other countries begin to question the "authority" of the dollar and the "security" of US debt. China's reduction of its holdings of U.S. bonds is more about ensuring the safety of foreign exchange, and because of the economic ties between China and the United States, China should not reduce U.S. debt to zero, but will remain in a reasonable range.
This is contrary to the view of "China's counter-US policy" put forward by the South Korean media, and China's reduction of its holdings of US bonds is more about taking precautions to achieve "diversification" and "stability" of foreign exchange, which is a feasible strategy to deal with global financial risks.
It can be said that in the eyes of China, we are only restructuring the composition of US debt assets, while others see China as "making this move" in order to counter the US, and there are growing concerns about whether China's actions will exacerbate the risk of US debt.
In the final analysis, the reason why other countries are alienating from US debt is not China, but because they have resorted to America's own financial strategy.
And in the United States, regions such as Kansas are choosing to recognize gold and silver as the state's "legal tender" in order to deal with dollar risks. Even the United States itself has lost confidence in the dollar, not to mention the attitude of other countries in increasing their holdings of US bonds.
As the U.S. fiscal deficit problem erupted, more U.S. bonds were issued and U.S. bond yields were higher, but more countries were also moving further and further down the path of reducing their U.S. debt holdings. Who's digesting the extra U.S. debt? The United States now still has to appeal to American residents and families.
However, with the intensification of geopolitical risks and the higher risk of a default on U.S. bonds, perhaps real money and other physical goods will become the choice of more countries or individuals. If the United States does not adjust the balance of supply and demand next year, I am afraid that China's plan to reduce its holdings will have to write a few more pages.