China falls into 2nd Place
China is now the 2nd largest holder of US Treasury assets. Japan is once again our biggest creditor.
The big question right now is whether or not this signals something a little more drastic. China has said that it wants to reduce its dollar exposure and this could be the beginning of a significant shift.
China was a net seller of more than $34 billion in Treasuries during December. My guess is that their balance is in the vicinity of $755 billion.
Japan was a net buyer and now holds $769 billion in Treasuries.
As we have written about, China’s reserve stockpile is mostly dollar denominated and they are concerned about both our ability to repay our debts and the growing US debt load.
PresBo has been on the offense lately doing a lot of tough talking about China’s current policies and internet censorship. He also imposed import duties on Chinese tires and other imports recently.
I said then that the move was unwise because it is never a good situation when you tick off your biggest creditor.
Given the naiveté of this administration, China may be sending a not so subtle message that this isn’t a level playing field. The economic and political ramifications of this message are something that Obama and friends will not be able to handle.
I am intrigued by what is going on here because a lot of other countries may follow China’s lead. Is this an aberration or the start of a trend?
Time will tell. Stay tuned.
