After increasing its holdings for 2 consecutive months, China's holdings of U.S. bonds have rebounded to 800 billion, and it wants to save the United States?
China has increased its holdings of U.S. bonds for 2 consecutive months, will it want to save the United States?
On February 15, the latest international capital flow report released by the U.S. Treasury Department showed that in December 2023, China increased its holdings by $34.3 billion, after November, ending a seven-month reduction of holdings by $12.4 billion, with a total increase of $46.7 billion in two months, making China's holdings rise again to $800 billion, reaching $816.3 billion.
Many netizens did not understand China's continuous increase in U.S. bonds, and asked why they didn't sell it and didn't empty it, why did they save the United States?
As for saving the United States, some bloggers have expressed alternative views. It is said that there is no alternative to the dollar now, that the yuan is not strong enough, and that once the dollar collapses, the world economy will be hit hard, and it will not benefit anyone. We should slowly remove the dollar, and wait for the internationalization of the renminbi to succeed, and then replace it.
Others say that the United States is still our biggest "financier", and our largest export destination is still the United States, and we still need them to buy our goods. If the U.S. economy fails, we'll be affected as well. When our foreign trade structure is more diversified, we will have more confidence.
After the 2008 financial crisis, we did save the United States once. At that time, US President Barack Obama came to China and asked us to buy US bonds. In that environment, we chose to cooperate with the United States, after all, we were also affected by the financial crisis.
We buy U.S. bonds in large quantities, and the U.S. buys our goods in large quantities. In 2010, China's GDP surpassed Japan's, making it the world's second-largest economy. China's holdings of U.S. bonds peaked at $1.3 trillion, while bilateral trade between China and the United States continued to grow, with a trade surplus of more than $300 billion with the United States.
However, this is no longer the case. At that time in 08, China's GDP was only 31% of that of the United States, and the gap was still very large. But now we all have 70 percent of the GDP of the United States, which is a level that the previous second-largest economy never reached.
The United States has regarded us as the biggest threat, and in the past few years, the United States has been constantly making moves to carry out all-round containment and attacks in the fields of science and technology, finance, and manufacturing, and there is no sign of easing the slightest. Some time ago, US Congressman Cotton questioned TikTok CEO Zhou Shouzi's nationality nine times, and after Zhou Shouzi repeatedly answered that he was Singaporean, Cotton still kept asking him about his relationship with China.
In the current environment, it is impossible for us to say that we should significantly increase our holdings of US debt to save the United States. Moreover, we can't save it, because the U.S. debt is already as high as 34 trillion U.S. dollars, and even if we buy all the U.S. bonds with 3 trillion foreign exchange, it will be less than 1/10 of it.
In November and December last year, the yield on 10-year U.S. Treasury bonds fell sharply, and the price of U.S. bonds rose, which made our holdings of U.S. bonds more valuable, which is equivalent to raising the value of assets.
In 2023, the U.S. economy will grow by 2.5%, and many people praise the U.S. for still being strong. I can only say that these people only see the surface, just like before the Evergrande accident, revenue and profits increased year after year, but behind the glamour is the growing debt.
Although the United States has the right to print money, it also has to pay interest. In the fourth quarter of 2023, for every $1 of GDP growth in the United States, it will cost a deficit of $1.55 and about $2.53 in debt.
From 2019 to 2023, U.S. GDP increased by $6 trillion, but debt increased by $11.28 trillion. U.S. interest expense in fiscal year 2023 reached $879.3 billion, an increase of $161.7 billion from the previous fiscal year. Total interest payments rose to 3.26% of GDP, the highest level in the last 23 years.
As debt rises, interest costs continue to rise, and this way of development is undoubtedly "eating more than you can eat". Once the U.S. economy stalls, the debt crisis could erupt at any time. This is also the reason why the United States is now doing everything to contain us, because the position of the American boss is not guaranteed, and the dollar collapses, then the American economy will be about the same.
In fact, you don't have to worry about the U.S. bonds we hold, we will definitely deal with them before flipping the table. And I guess it's hard for us to get back to trillions.