Preface
The new crown epidemic has led to the economic recession of countries around the world, take the United States as an example, the national debt of the United States has reached nearly 35 trillion US dollars, and the debt is like a snowball, rolling bigger and bigger.
Recently, in order to reduce its dependence on the US dollar, China has sold 22.7 billion US bonds, but someone has to take it, and some people think that it will not be Japan or the United Kingdom, after all, in addition to China, these two countries are the largest holders.
But in fact, no, although China is selling off two countries to increase their holdings, but Japan, the United Kingdom's economy is also sluggish, and some time ago, the United Kingdom also suffered a heavy economic blow, so there is only one person to take over, the Federal Reserve Board.
What exactly are U.S. bonds? Why is the receiver the U.S. Federal Reserve? Not long ago, Yellen's visit to China was also aimed at getting China to buy more U.S. bonds.
1. U.S. Treasuries
In fact, many people always hear about what they are increasing their holdings of U.S. bonds and selling U.S. bonds, but they don't know what U.S. bonds are.
Just like borrowing money from person to person, if I lend you 200 yuan in my hand, you must make an IOU, agree on a time to repay the money, and lend 200 yuan, how much interest do you want, the general meaning of US debt is the same, but there are some differences.
I always hear about the hegemony of the dollar, because the US government does not have to repay the principal when issuing this debt, and the new debt is used to offset the old debt, and the borrowed money is circulated as currency in the market.
His liquidity in the secondary market is not bad, and the demand for foreign exchange security and value preservation in many countries has created U.S. bonds, backed by U.S. credit, so some countries still recognize it.
And among so many countries, the most money lent to the U.S. government is first of all Japan, which holds $1.16 trillion in U.S. debt, then China, the United Kingdom, and the Federal Reserve, and the United States itself owes itself money, but the inflation caused by the epidemic will print more money after running out of money.
Coupled with the fact that the United States is on fire everywhere, every two countries are in a bit of conflict, and he has to intervene, just like the mainland and Taiwan, Ukraine and Russia, China is worried about the future economic policy of the United States, so it began to sell US bonds slightly, but this move made the United States panic.
So Yellen's visit to China in early April seemed to be to discuss the development of the new energy industry, but in fact, it was to try to get China to buy more U.S. bonds, but they did not show a begging attitude.
2. Yellen's visit to China
During Yellen's visit to China in early April, she met with a number of senior Chinese leaders, and the two sides discussed issues such as financial stability and reached a preliminary agreement.
First, saying that China's overcapacity has affected the local industry in the United States, and that China's new energy vehicles are developing faster than the United States imagined, they are not thinking about how to develop greener cars, but to sanction China.
Yellen means that if the new energy industry is still exported to the United States, it will sanction other Chinese companies, and the more I listen to this sentence, the more I want to laugh, as if there will be no sanctions if I don't export, Yellen has sanctioned several Chinese companies after returning from her visit to China.
Second, I hope that China will increase its holdings of U.S. bonds, but Yellen did not put it forward openly, after all, they will never be able to come up with an attitude of begging for people, they are high, they feel like they are very good, they have been going around in circles, and China does not directly propose it, you want us to buy it with a due attitude.
Moreover, the United States is now very financially tight, and it was trying to stimulate the economy by borrowing, but it did not meet the expectations of the United States, and now the annual interest is nearly a trillion dollars, although China is selling, but Japan and the United Kingdom are still increasing their holdings.
So this time China threw out 22.7 billion U.S. bonds, is it Japan or the United Kingdom?
3. Pick-up man
According to official data, Japan, the United Kingdom, and the United States are increasing their holdings, but they are also increasing slightly, with nearly 35 trillion U.S. national bonds, and Britain, Japan, and China adding up to only 1 trillion, which shows that the bulk is not our countries at all, but the Federal Reserve.
So there is the hegemony of the dollar mentioned above, the dollar is the world's common currency, which is undoubted, but de-dollarization has also been put on the agenda in many countries, as a universal currency must have the ability to appeal, to gain everyone's trust, but the operation of the United States in the past two years is disgusting.
However, China has adhered to peaceful diplomacy since ancient times, and has commercial cooperation with many major countries, and many countries are optimistic about the renminbi, although it is unlikely that the renminbi will become a universal currency in a short period of time, so who knows if it will be in the future?
We have no way to predict the future, we can only be optimistic about the present, so China sells US bonds in order to adjust the structure of foreign exchange reserves, which cannot be easily manipulated by other countries, which also tells us that these people have risks in investment, and we must keep our eyes open.
Take one step at a time, who will be the final winner, no one knows, if you want to cooperate, show a cooperative attitude, let everyone see.
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Resources
1. Financial circles2024.04.48 - Foreign media: China sells $22.7 billion in U.S. Treasury bonds, Japan's holdings increase, and the big power game shows differences
2. Economic Observer2024-04-18 - China reduced its holdings of U.S. bonds by $22.7 billion in February: hedging the risk of falling U.S. bond prices, and diversifying the allocation of reserve assets to help stabilize the exchange rate