According to the report, China has been steadily reducing its holdings of U.S. bonds. At present, this number has fallen sharply to 775 billion US debt, back to the low level of 2009
The data shows that China has stepped up the sell-off of U.S. bonds since last year. It is particularly noteworthy that in the 13 months leading up to February this year, China has reduced its holdings of U.S. bonds for 11 consecutive months, with the overall holdings shrinking by as much as 42%, and the total amount of U.S. bonds sold has reached a staggering 545 billion
Such a large-scale sell-off in China may not be just a readjustment of investment strategy. It is more of a warning sign that the U.S. bond market is facing significant risks, or even a precursor to a U.S. debt crisis, and it also reveals possible problems in the U.S. economy
At the same time, the U.S. stock market has been significantly affected by the escalation of regional tensions. The major stock price indices continued to slide, recording the longest decline in more than a year. In addition, weakening expectations of U.S. interest rate cuts have further exacerbated the sell-off in U.S. bonds, leading to large outflows
Interestingly, data from U.S. financial websites show that the U.S. banking sector is facing severe outflows. In the last week alone, funding fell by $112 billion, a record reduction in two weeks. At the same time, bank deposits and various fund assets also fell sharply, with a total decline of more than $330 billion
In the first quarter, the U.S. national debt has rushed above $34.5 trillion, and by the end of this year, the United States will face the pressure of repaying the national debt of $7.6 trillion, and the task is arduous. To that end, Treasury Secretary Janet Yellen is busy seeking investors to issue new debt to deal with the huge debt maturities
However, the current problem is that the benchmark interest rate in the United States has not been significantly lowered, and the interest rate on newly issued US bonds is generally high, sometimes even exceeding 5%, which undoubtedly increases the government's interest expense.
According to statistics, the United States spent more than $800 billion on debt interest in the last fiscal year, and in the past four months this year, interest payments have reached $522 billion, and the fiscal pressure is obvious.
Currently, the U.S. still maintains a high interest rate of 5.5%, resulting in an annual interest expense of more than $1 trillion. In addition, as the size of the debt continues to grow, the U.S. fiscal deficit continues to rise. This practice of borrowing new debts to repay old debts has increased the burden on the Ministry of Finance.
This situation may be the reason for Yellen's frequent visits to China, and it is clear that she is anxious to find a solution
The U.S. has maintained high interest rates in order to benefit from China, but they know they can't raise them any further
The CEO of a major US bank even publicly threatened to raise interest rates to 8% with the possibility that the Fed would not cut interest rates. Compared with the CEO's aggressive remarks, Fed Chairman Jerome Powell's statement was more steady, saying that the United States is not in a hurry to cut interest rates at the moment
Interestingly, despite the dire state of the US economy, it is still pointing fingers at China's economy and even downgrading the credit ratings of China's state-owned banks
This is groundless and nonsense. In fact, the U.S. credit rating system has long since lost credibility, and if it were not for the dependence of the international financial system, its rating would probably be undesirable
In the face of external pressure, China decisively released a series of dazzling data
GDP growth in the first quarter was 5.3%, exceeding market expectations. Compared with 4.5% in the same period last year, it has increased by 0.8 percentage points, which fully proves China's outstanding performance in the world economic environment
In contrast, in the United States, GDP growth in the first quarter is expected to be only 2.4%, and the actual growth rate may be even lower, while in the European Union, the growth rate is only 1.3%, and Germany's GDP growth is even negative
The current situation is in our favor, and while the Fed continues to raise interest rates to combat inflation and has had a superficial effect, this could pose potential risks to US finance
Although the scale of the US debt held by the mainland is not large, if the strategy is used properly, it may become the fuse that triggers the US financial crisis at a critical moment