Japan overtakes China as the largest foreign holder of US debt

[IsaacNewton]

China should not dump 1.2 trillion worth of asset, but owning 1.2 trillion US treasury bond is quite perplexing because it is a low return investment.

After all, only 15 countries has a GDP that is greater than 1.2 trillion. China should diversify its holdings instead.

 

[Edison Chen]

I don't think China is selling US bonds; the US is just not borrowing as much anymore.

True

 

[Aepsilons]

For Japan that‘s all their pension money...
True loyalty indeed

LOL

Dude, Japanese Pension Fund is totally separate , separate from our Foreign Reserves. Imagine a nation of only 128 million, yet we have a combined foreign reserve of $2.5 Trillion.


China is 1.4 billion but your foreign reserves is just hitting $4 Trillion.

 

[Keel]

in a scenario of devaluating Japanese yen against strengthening dollars what risk free (almost) investment would you like to take?
A simple investment strategy and hedging for the yen isnt it?

Ancient Chinese art of paper folding

 

[Aepsilons]

As the value of the dollar strengthens over the EURO, and other currency, ownership of US bonds has practical implications.

Instead, it's about a general decline in long-term growth and inflation expectations, the same factors that always determine interest rates.

Bottom line: China and Japan own US debt because they sell a lot of stuff to the US and those dollars get put back into Treasuries. That's it.

Japanese Origami, with US Dollar.

 

[deckingraj]

China should not dump 1.2 trillion worth of asset, but owning 1.2 trillion US treasury bond is quite perplexing because it is a low return investment.

After all, only 15 countries has a GDP that is greater than 1.2 trillion. China should diversify its holdings instead.

sorry but pegging and high reserves are interlinked..no??

 

[Keel]

In the expectation of increase in interest rates in near future and coupling with the strengthening of the dollar what would your countries' financial statements appear when all these come into effect if you are still holding US debts?

In addition the US deficit is shrinking that means it requires less extra money to balance its budget so even if it ceases its QE, it has other venues to recoup the short fall of money supply

Ancient Chinese Art of Paper Folding

 

[大汉奸柳传志]

LOL

Dude, Japanese Pension Fund is totally separate , separate from our Foreign Reserves. Imagine a nation of only 128 million, yet we have a combined foreign reserve of $2.5 Trillion.


China is 1.4 billion but your foreign reserves is just hitting $4 Trillion.

Yet they kept picking up the shares dumped by China in the last years until just recently they switch to more stocks.

Some people wonder what exactly was going on during that period considering at the same time the US needed the 10yr treasury yield below 2% so badly,making the fund appears more of a safety net for the US treasury rather than japanese pensioners

 

[somsak]

This is as expected. AIIB must have drained a lot of Yuan that would be buying US bond.
Theoretically, this is a wise investment because US bond yield should be much lower than building infrastructures.
However, there are still risk of being defaulted from debtor countries.
but Again, loaning back to US treasury also risk being defaulted too.
So one can say, this is a risk diversification as well as intestment.

 

[Aepsilons]

Japan and China invest in the United States in order to diversify risk, especially if returns in U.S. financial markets have little correlation with returns in their own country's domestic financial markets. Both put their money in the US because of their strong linkages with the United States, through trade flows or such measures of "closeness" as distance, inexpensive communications, or sharing a common language.

Why does China buy US debt? Simple! Chinese exporters bring in a lot of dollars got from selling their wares to US (and elsewhere). Since the exporters have to pay Yuan for their workers, they have to sell their dollars and get Yuan. Now, the dollars are in excess supply and Yuans are in short supply. Without an external involvement, the dollars would go down against the Yuan. This will go on until the Chinese exports become expensive enough to become comparable to US goods.

 

[Keel]

This is as expected. AIIB must have drained a lot of Yuan that would be buying US bond.
Theoretically, this is a wise investment because US bond yield should be much lower than building infrastructures.
However, there are still risk of being defaulted from debtor countries.
but Again, loaning back to US treasury also risk being defaulted too.
So one can say, this is a risk diversification as well as intestment.

This is not true
AIIB will take at least half a year or even longer to take shape and be operational
By comparison to the sizes of US debt to the holders, the injection of capital into AIIB is relatively small amounts and Japan is not even a founding member
Also when the money is in AIIB, the money belongs to the institution. Your country can only get back returns from investment in AIIB upon profit distribution, if any or upon liquidation of the institution and that would take at least 1 or 2 or more years to materialise
So investing in AIIB and buying US $ debts are irrelevant and definitely not in the foresseable months ahead

China Jingdezhen porcelain vase

 

[Jlaw]

True

That is not true. Just look at the risk free US rate. Lower rates mean they are printing more money as they lowered rates recently.

 

[Cossack25A1]

Isn't printing too much paper money dangerous in terms of economics?

 

[Kamil_baku]

Isn't printing too much paper money dangerous in terms of economics?

it is, but as most of the petrol is sold by dollar, they take that into consideration, instead of their own GDP..

 

[mike2000 is back]

Buying US debt has been the biggest mistake in Chinese economic/financial history. Yes, HISTORY!

And no, China does not and did not depend on the U.S. for its growth. One of the biggest myths created by the Western propaganda apparatus to scare China.

China should dump all its treasury bonds and use those dollars to buy gold, oil, gas, metals and loan out the money to Chinese corporations to buy strategic assets overseas and even loan out some money to countries in need for geopolitical purposes.

Holding treasury bonds is an utterly useless policy where you earn tiny returns and gets nothing in return as far as strategic assets.

Ending the dollar peg will be another goal.

Well you maybe right, but then again your CCP elites don't think so. They have a different way of thinking from you as a common citizen. Truth is that, elites all over the world have different interests than those of their people, so they will do what is best for them first and foremost than what is best for the country/common people as a whole. So no china's CCP won't stop buying U.S bonds/borrowing to the U.S.

Yes, China should just dump over $1.2 Trillion of bonds down the toilet. You have much sense.

[sarcasm]

Don't mind them bro. Some ultra nationalists always have a radical way of thinking. China won't stop buying U.S bonds, I'm sure the CCP knows better than its ultra nationalistic people.