Musk made a lightning visit to China, and he soon received good news, at the same time, many wealthy people are fleeing the United States, and they are keenly aware of the anomaly.
It seems that as with the spiraling U.S.-China relationship in recent years, China's total holdings of U.S. debt have continued to decline. According to the report on international capital flows released by the U.S. Treasury Department, in February this year, China reduced its holdings of U.S. bonds by another US$22.7 billion, bringing its total holdings to US$775 billion, close to a new low since 2009. Compared with the trillions of dollars at its peak in 2013, China's holdings of U.S. bonds have decreased by more than $500 billion in 11 years, falling by more than 40%, and the reduction has been faster in the past two years. If this trend continues, will China's holdings of U.S. debt be completely reduced to zero?
To answer this question, we must first understand the reasons why China is accelerating the reduction of its holdings of US bonds, and there may be three main factors.
First, the U.S. debt is growing, and the U.S. government's ability to repay its debts is questionable, and although the U.S. has not defaulted, China needs to take precautions, which is one of the motivations for reducing its U.S. debt holdings.
Second, the impact of geopolitical factors is becoming more and more difficult to ignore, and the Russia-Ukraine conflict shows that the Western bloc may unreasonably freeze the assets of other countries due to geopolitical issues. There are too many geopolitical differences between China and the United States, and the possibility of conflict between the two sides cannot be ruled out, and China has reduced some of its U.S. bond holdings in order to avoid risks.
Third, China is promoting the internationalization of the renminbi, and in the long term, China needs to reduce its dependence on US dollar assets, which is a long-term motivation for China to reduce its holdings of US debt.
After talking about the above three reasons, everyone should be able to understand why China wants to reduce its holdings of U.S. bonds, but for a long time to come, the dollar will still be an international currency, although the big expectation of depreciation remains unchanged, but it is unlikely to directly become "waste paper". U.S. bonds can be regarded as interest-bearing dollars, and for a large surplus country like China, there will definitely be a lot of dollars in hand, and it is certainly not cost-effective to hold dollars for nothing and not invest. Therefore, it is possible that China will continue to reduce its holdings of US bonds in the future, but it is unlikely to be reduced to zero, and this should be understood. As a well-known leader in the field of business and technology in the United States, on the afternoon of April 28, Tesla CEO Elon Musk suddenly arrived in Beijing by private jet and opened a "lightning" visit to China, and is expected to exchange views with representatives of the Chinese business community on the next step of cooperation.
It should be said that Musk's visit to China at this time is not surprising at all, in the context of Sino-US economic and trade tensions, it is necessary for American business giants to come to China to see the situation, if possible, they obviously want to ease Sino-US relations, so as to create better opportunities for themselves to promote their business in China. Interestingly, on the same day, Tesla passed 4 tests on car data security by relevant Chinese departments, and restrictions on the use of Tesla vehicles have been lifted one after another. For Musk, this is definitely good news, and everyone should know why this news was announced at this time. Musk's experience is tantamount to setting an example for other American business people, as long as they show goodwill for cooperation with China, then China will give them good business conditions, and China's huge market is beckoning to entrepreneurs from all over the world.
It is worth noting that the U.S. government's efforts to suppress and smear China's market environment have failed, and there has been an abnormality in the U.S. mainland. The American website "Business Insider" revealed that the number of wealthy Americans applying for foreign citizenship or residency has skyrocketed in recent years. From billionaires, tech entrepreneurs, to celebrities, they are working on an immigration "plan B" for their families. The destination countries involved include Portugal, Malta, New Zealand and Austria, and there are many options for immigration funding at different price points. For a country, the flow of the rich class, which represents the flow of national money, is a stark warning for Washington. As for why the American tycoons chose to leave, perhaps they saw the political rift in the United States, or they saw the risk of a debt explosion in the United States, but whatever the reason, this is worthy of the vigilance of the US government. This reminds Washington once again that instead of bent on suppressing China, it is better to solve its own problems.