25 ms·

Japan surpasses China as largest foreign holder of US Treasurys

260 points by hker 7y ago

40acres 7y ago
Most U.S Treasuries are held by American citizens, it's why fiscal hawks are always ranting that defecit spending "bankrupts our kids", foreign holdings are insignificant in the grand scheme, and as noted the largest holders are all allies.
- cobbzilla 7y ago
  Wikipedia has foreign holdings at 28% and growing as of 2008 [1]. That’s enough for bargaining leverage in many situations. [1] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
  - khuey 7y ago
    If the entire world pooled their holdings, yeah, sure.
    - zaroth 7y ago
      Wake me up when they pool their armies.
    - cobbzilla 7y ago
      1 The prospect of a default will tend to align incentives across all debt-holders. 2 Of the foreign debt, Japan + China hold the lion’s share at about 40%, so definitely worry if you ever see those two aligning against us. It will be important for the US not to piss off Japan.
  - nradov 7y ago
    Which situations?
- chibg10 7y ago
  What does this have to do with anything? The problem with too much US debt is that we have to make interest payments on that debt, which now makes up ~10% of the annual budget (or about $400B/yr). That's expensive and going to get worse if we continue borrowing at unsustainable rates. It's also going to get a lot worse if investors start to worry the US might default on its debts and demand higher yields on return. I'm not sure why you think it matters whether China or Europe is holding the debt.
  - phil248 7y ago
    A friend may work with you to negotiate terms, even at their own expense. A rival may use it against you in pursuit of their own benefit.
  - arcticbull 7y ago
    > What does this have to do with anything? The problem with too much US debt is that we have to make interest payments on that debt, which now makes up ~10% of the annual budget (or about $400B/yr). That may matter to you as an individual but governments get to print money. It's like if I issued IOUs denominated in Steve's Funbucks that I'm the sole issuer of, and those IOU holders lived across the ocean and also I had half the world's armed forces at my disposal. Then when things went sideways I fired up the Epson and paid you off. As it turns out inflation is not directly connected to the issuance of new money, although it does contribute. Balancing a federal checkbook isn't the same as your home finances. I'm not saying you should go to town and print a ton of money and that nothing would happen, I'm saying it can play a role and isn't directly equatable to small-scale finance. (Edit) further, borrowing to create economic activity is not zero sum. If you borrow 100K and create a business worth $1M, and reap the tax returns, it doesn’t matter how much you owe. If I borrow $1T and create a $5T economy, I doubt the kids will mind. This is in part why the money supply increases over time — to reflect the new scope of the economy. The only material risk of taking on debt is that you need to create returns in excess of your interest payments.
    - perl4ever 7y ago
      It seems to me that "half the world's armed forces" is a result of being able to print money, not a cause.
- ThrustVectoring 7y ago
  That's pretty funny, since a trivial analysis of the flows of real goods and services will show that your kids are going to almost entirely consume the real goods and services that they produce. No, what excessive deficit spending does is generate an excess of financial assets that lay claim to the same pile of goods and services. This makes the financial assets less valuable, reducing the ability for current savers to trade their assets for today's real goods and services. This is through a combination of an increase in interest rates (reducing the value of bonds) or through outright inflation. Another way of thinking about it: the supply of real goods and services is relatively fixed, so what happens when the government consumes more today? Somehow this needs to reduce the real goods and services consumed by society, and that can only happen in a few ways: involuntarily through taxation, involuntarily through loss of purchasing power due to inflation, or voluntarily through selling more attractive financial assets.
  - maxerickson 7y ago
    The supply of real goods is anything but fixed. On my side, I have evidence like the global population doubling while poverty plummeted. There's still lots of people without enough to eat, but 30 or 40 years ago was a completely different story, it was much worse.
    - ThrustVectoring 7y ago
      Fixed, in the short run, with respect to money, while there is sufficient money in the economy.
  - pjc50 7y ago
    Part of the argument of Keynes was observing that supply is not at all fixed, there is idle capacity - unemployed people and idle physical capital. Production can be increased without inflation up until "full employment" is reached.
    - ThrustVectoring 7y ago
      The curve of money supply versus output is flat at the "way too much money" end of it. If there isn't enough money then obviously you fix the problem - but this isn't where the deficit hawks are usually worried about debt.
- nabla9 7y ago
  Estimated Ownership of U.S. Treasury Securities (From Fed Bulletin) $22T - Total Federal securities outstanding $9T - Federal Reserve and Government accounts + State and local governments including pension funds $2T - Mutual funds $2T - Depository institutions, private pension funds, insurance companies. $3T - Other domestic investors. Includes individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors $6T - Foreign and international
spectramax 7y ago
I am not familiar with Treasuries, I'd appreciate some insight into what this means "China has been a less aggressive buyer of the U.S. sovereign debt". How is it possible to "hold" (buy) another country's debt?
- thoughtstheseus 7y ago
  The U.S. govt. holds a sale of treasuries every so often and people/entities buy them. Nothing special about it. They're high quality and liquid assets so they can be frequently found in many investment portoflios and balance sheets (essentially as good as cash).
- codesushi42 7y ago
  "China has been a less aggressive buyer of the U.S. sovereign debt" It means China is dumping US debt. Which will mean a surge in interest rates, a weaker US dollar, and in a nightmare scenario, hyperinflation.
  - _0ffh 7y ago
    > It means China is dumping US debt. Which will mean a surge in interest rates, a weaker US dollar, and in a nightmare scenario, hyperinflation. But then again, the popular wisdom seems to be that a weak currency supports exports. So I don't know that this is clearly a bad thing. Hyperinflation I would peg to be usually caused by a break down of the domestic market.
    - wolco 7y ago
      A weak currency means more exports but higher import prices. Add the additional tariff coming soon means anything from China will get more expensive. Perhaps this forces Trump to drop them.. it could backfire and create a local industry that will compete against China.
      - whatshisface 7y ago
        If you believe Trump, then the creation of a tarrif-protected local industry would constitute "front-firing."
SllX 7y ago
Near as I can tell, and I’ve checked on this infrequently over the past few years, Japan’s holding of US debt have always been within spitting distance of China’s, where spitting distance is a few hundred billion give or take. So the news in itself isn’t surprising. That is to say, I think it would be a mistake to read much into this. The largest share of Federal debt is held domestically, really the lion’s share. China and Japan are generally within the trillion dollar range, and are always #1 and #2 foreign holders of US debt.
- deleted 7y ago
  [deleted]
- arcticbull 7y ago
  To my knowledge China has intentionally be reducing its holding of US treasuries as part of the ongoing trade... kerfuffle. Yes, China and Japan are usually close, but this delta was closed not because Japan bought more T-bills but because China sold theirs off over the last few months, and is continuing to do so. They're down to the lowest level of holdings since 2017. [1,2,3] To your point the majority is held domestically but this does create pressure on the instruments at the margins and raises the cost of borrowing both now and over time. Some of that is being masked now by the flight of capital to safety, particularly domestically, over concerns of the same recession. Less buyers of T-bills raises interest rates, which in turn raises the cost of borrowing money, which in turn pushes down equities. I doubt the Chinese could sell off their T-bills any faster without risking de-valuing their holdings. With that said, I doubt their holdings go up until this trade war ends, if ever, and this will prove problematic once the dust settles. A worst-case scenario for the US is higher interest rates [wiping out current bond investors] combined with lower equities [wiping out current stock investors]. This yields inflation and removes the levers of economic control from the federal reserve -- it could be devastating. [1] (May) https://www.bloomberg.com/news/articles/2019-05-15/china-s-u-s-treasury-holdings-post-first-decline-since-november https://www.bloomberg.com/news/articles/2019-05-15/china-s-u... [2] (June) https://www.bloomberg.com/news/articles/2019-06-17/china-cuts-u-s-treasury-holdings-to-two-year-low-amid-trade-war https://www.bloomberg.com/news/articles/2019-06-17/china-cut... [3] (July) https://www.scmp.com/business/companies/article/3018924/chinas-may-holdings-us-treasuries-dip-third-straight-month-two https://www.scmp.com/business/companies/article/3018924/chin...
Bud 7y ago
Headline should be "Treasuries". What the heck, CNBC. You're a financial network. You can't spell "treasuries"?
- sb057 7y ago
  https://www.cnbc.com/id/32462271 https://www.cnbc.com/id/32462271 >The short answer is that the "misspelling" is on purpose, done to differentiate Treasury bonds from the plural for the Department of Treasury, though I'm not sure why you'd ever need to pluralize that. In any event, a number of business news organizations, including CNBC, use the "Treasurys" spelling.
  - javert 7y ago
    Seems like they are in step with the times. Brawndo: it's what plants crave.
  - Bud 7y ago
    That makes no sense at all. There is no plural for the "Department of [sic] Treasury", which, btw, is called the Department of THE Treasury. So if it's done on purpose, that's even more idiotic.
    - somebodythere 7y ago
      Colloquially known as the US Treasury, which could conceivably be pluralized as Treasuries. Some other reasons for the alternative spelling: In many style guides, proper nouns ending in -y are pluralized as -ys, not as -ies. For example, Casey plural would be Caseys, not Casies. Treasury, referring to the type of institution is not on its own a proper noun, but "Treasury", the name of the security emitted by the US Treasury, might be. Another reason for the alternative spelling is in financial settings, the plural of Treasury (notes, bonds, etc.) is abbreviated as Tsys. Treasurys is a reasonable "backronym" for that.
      - Bud 7y ago
        "Might be"? Yes, I suppose. Is? No. "treasuries" is the long-accepted spelling here.
anm89 7y ago
Treasurys? Is that a valid spelling? I always assumed it was treasuries.But I'm assuming they didn't forget to prrof the headline?
- geofft 7y ago
  Answered in https://news.ycombinator.com/item?id=20721467 https://news.ycombinator.com/item?id=20721467 - seems to be their house style, cf. https://www.cnbc.com/us-treasurys/ https://www.cnbc.com/us-treasurys/
  - JumpCrisscross 7y ago
    It’s a proper noun. Treasurys are lots of bonds. One with treasuries has, I don’t know, chests of silver?
rayanami 7y ago
People who are more in the know - is this likely to be part of a long-term trend or is this a short term reaction to recent US-China relations?
largbae 7y ago
As I understand it, other countries' "belief in our debt" has little to do with their treasury holding levels. All countries that net export products to the US tend to end up owning T-bills proportionate to their export surplus. This is because their banks end up with a bunch of US-Dollar-denominated cash from exchanges by the exporting companies, and getting a return of even 1.5% (our 2-year interest rate) is better than 0% on cash. The treasury level rising and falling is not usually intentional or by itself sinister, merely a byproduct of a fluctuating export surplus. This article has a nice illustration of the process: https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/ https://www.theatlantic.com/business/archive/2011/03/infogra... https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/ https://www.theatlantic.com/business/archive/2011/03/infogra...
- eof 7y ago
  One does not follow from the other. Your explanation would only make sense if the only two choices are keep cash or buy US debt. Of course their holdings have to do with their belief in US debt, those dollars could be spent on many things.
  - qroshan 7y ago
    You have to be careful about that sentence. The only other options is to sell $ for another currency. Anything that they buy things that are denominated in $ are usually US imports hence goes back to the net export calculation. Of course they can also use to buy global commodities like Gold, Oil which are denominated in $$, but that is just a proxy for selling $ in foreign exchange and using that currency. So, logically only 2 options. Sell US $ in FX or buy US assets (Bonds, Stocks, Real Estate)
    - largbae 7y ago
      Exactly right. Also you need to think about the sheer amount of dollars that China and Japan have. There are only so many investments that can give you a return on 1 trillion dollars without significantly adding to the risk of losing the principal. Treasury bills are essentially no more risky than the cash that you trade for them.
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peter303 7y ago
They are small players compared to the Social Security Trust Fund and the Federal Reserve Quantitative Easement holdings. Both of those total six times Japan or China.
datumy 7y ago
I believe the real reason why China is no longer the largest holder is that, China SPENDS tons of dollars she earns/holds on one-belt-one-road projects. US and western countries are super unhappy about that, as China effectively de-weaponize dollars. China is supposed to earn/hold US paper money and never to spend it. Just my 2cents.
- runeks 7y ago
  Owning a piece of infrastructure definitely seems more valuable than owning a foreign government bond. But I don’t see how this “de-weaponizes” the US Dollar.
marcosdumay 7y ago
China seems to be having a huge capital flight. It has just removed the peg on their currency price, what is a large giveaway. It's perfectly natural that foreign currency reserves stop increasing or even decrease.

260 points by hker 7y ago

Most U.S Treasuries are held by American citizens, it's why fiscal hawks are always ranting that defecit spending "bankrupts our kids", foreign holdings are insignificant in the grand scheme, and as noted the largest holders are all allies.

cobbzilla 7y ago
Wikipedia has foreign holdings at 28% and growing as of 2008 [1]. That’s enough for bargaining leverage in many situations. [1] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
- khuey 7y ago
  If the entire world pooled their holdings, yeah, sure.
  - zaroth 7y ago
    Wake me up when they pool their armies.
  - cobbzilla 7y ago
    1 The prospect of a default will tend to align incentives across all debt-holders. 2 Of the foreign debt, Japan + China hold the lion’s share at about 40%, so definitely worry if you ever see those two aligning against us. It will be important for the US not to piss off Japan.
- nradov 7y ago
  Which situations?
chibg10 7y ago
What does this have to do with anything? The problem with too much US debt is that we have to make interest payments on that debt, which now makes up ~10% of the annual budget (or about $400B/yr). That's expensive and going to get worse if we continue borrowing at unsustainable rates. It's also going to get a lot worse if investors start to worry the US might default on its debts and demand higher yields on return. I'm not sure why you think it matters whether China or Europe is holding the debt.
- phil248 7y ago
  A friend may work with you to negotiate terms, even at their own expense. A rival may use it against you in pursuit of their own benefit.
- arcticbull 7y ago
  > What does this have to do with anything? The problem with too much US debt is that we have to make interest payments on that debt, which now makes up ~10% of the annual budget (or about $400B/yr). That may matter to you as an individual but governments get to print money. It's like if I issued IOUs denominated in Steve's Funbucks that I'm the sole issuer of, and those IOU holders lived across the ocean and also I had half the world's armed forces at my disposal. Then when things went sideways I fired up the Epson and paid you off. As it turns out inflation is not directly connected to the issuance of new money, although it does contribute. Balancing a federal checkbook isn't the same as your home finances. I'm not saying you should go to town and print a ton of money and that nothing would happen, I'm saying it can play a role and isn't directly equatable to small-scale finance. (Edit) further, borrowing to create economic activity is not zero sum. If you borrow 100K and create a business worth $1M, and reap the tax returns, it doesn’t matter how much you owe. If I borrow $1T and create a $5T economy, I doubt the kids will mind. This is in part why the money supply increases over time — to reflect the new scope of the economy. The only material risk of taking on debt is that you need to create returns in excess of your interest payments.
  - perl4ever 7y ago
    It seems to me that "half the world's armed forces" is a result of being able to print money, not a cause.
ThrustVectoring 7y ago
That's pretty funny, since a trivial analysis of the flows of real goods and services will show that your kids are going to almost entirely consume the real goods and services that they produce. No, what excessive deficit spending does is generate an excess of financial assets that lay claim to the same pile of goods and services. This makes the financial assets less valuable, reducing the ability for current savers to trade their assets for today's real goods and services. This is through a combination of an increase in interest rates (reducing the value of bonds) or through outright inflation. Another way of thinking about it: the supply of real goods and services is relatively fixed, so what happens when the government consumes more today? Somehow this needs to reduce the real goods and services consumed by society, and that can only happen in a few ways: involuntarily through taxation, involuntarily through loss of purchasing power due to inflation, or voluntarily through selling more attractive financial assets.
- maxerickson 7y ago
  The supply of real goods is anything but fixed. On my side, I have evidence like the global population doubling while poverty plummeted. There's still lots of people without enough to eat, but 30 or 40 years ago was a completely different story, it was much worse.
  - ThrustVectoring 7y ago
    Fixed, in the short run, with respect to money, while there is sufficient money in the economy.
- pjc50 7y ago
  Part of the argument of Keynes was observing that supply is not at all fixed, there is idle capacity - unemployed people and idle physical capital. Production can be increased without inflation up until "full employment" is reached.
  - ThrustVectoring 7y ago
    The curve of money supply versus output is flat at the "way too much money" end of it. If there isn't enough money then obviously you fix the problem - but this isn't where the deficit hawks are usually worried about debt.
nabla9 7y ago
Estimated Ownership of U.S. Treasury Securities (From Fed Bulletin) $22T - Total Federal securities outstanding $9T - Federal Reserve and Government accounts + State and local governments including pension funds $2T - Mutual funds $2T - Depository institutions, private pension funds, insurance companies. $3T - Other domestic investors. Includes individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors $6T - Foreign and international

spectramax 7y ago

I am not familiar with Treasuries, I'd appreciate some insight into what this means "China has been a less aggressive buyer of the U.S. sovereign debt". How is it possible to "hold" (buy) another country's debt?

thoughtstheseus 7y ago
The U.S. govt. holds a sale of treasuries every so often and people/entities buy them. Nothing special about it. They're high quality and liquid assets so they can be frequently found in many investment portoflios and balance sheets (essentially as good as cash).
codesushi42 7y ago
"China has been a less aggressive buyer of the U.S. sovereign debt" It means China is dumping US debt. Which will mean a surge in interest rates, a weaker US dollar, and in a nightmare scenario, hyperinflation.
- _0ffh 7y ago
  > It means China is dumping US debt. Which will mean a surge in interest rates, a weaker US dollar, and in a nightmare scenario, hyperinflation. But then again, the popular wisdom seems to be that a weak currency supports exports. So I don't know that this is clearly a bad thing. Hyperinflation I would peg to be usually caused by a break down of the domestic market.
  - wolco 7y ago
    A weak currency means more exports but higher import prices. Add the additional tariff coming soon means anything from China will get more expensive. Perhaps this forces Trump to drop them.. it could backfire and create a local industry that will compete against China.
    - whatshisface 7y ago
      If you believe Trump, then the creation of a tarrif-protected local industry would constitute "front-firing."

SllX 7y ago

Near as I can tell, and I’ve checked on this infrequently over the past few years, Japan’s holding of US debt have always been within spitting distance of China’s, where spitting distance is a few hundred billion give or take. So the news in itself isn’t surprising. That is to say, I think it would be a mistake to read much into this. The largest share of Federal debt is held domestically, really the lion’s share. China and Japan are generally within the trillion dollar range, and are always #1 and #2 foreign holders of US debt.

deleted 7y ago
[deleted]
arcticbull 7y ago
To my knowledge China has intentionally be reducing its holding of US treasuries as part of the ongoing trade... kerfuffle. Yes, China and Japan are usually close, but this delta was closed not because Japan bought more T-bills but because China sold theirs off over the last few months, and is continuing to do so. They're down to the lowest level of holdings since 2017. [1,2,3] To your point the majority is held domestically but this does create pressure on the instruments at the margins and raises the cost of borrowing both now and over time. Some of that is being masked now by the flight of capital to safety, particularly domestically, over concerns of the same recession. Less buyers of T-bills raises interest rates, which in turn raises the cost of borrowing money, which in turn pushes down equities. I doubt the Chinese could sell off their T-bills any faster without risking de-valuing their holdings. With that said, I doubt their holdings go up until this trade war ends, if ever, and this will prove problematic once the dust settles. A worst-case scenario for the US is higher interest rates [wiping out current bond investors] combined with lower equities [wiping out current stock investors]. This yields inflation and removes the levers of economic control from the federal reserve -- it could be devastating. [1] (May) https://www.bloomberg.com/news/articles/2019-05-15/china-s-u-s-treasury-holdings-post-first-decline-since-november https://www.bloomberg.com/news/articles/2019-05-15/china-s-u... [2] (June) https://www.bloomberg.com/news/articles/2019-06-17/china-cuts-u-s-treasury-holdings-to-two-year-low-amid-trade-war https://www.bloomberg.com/news/articles/2019-06-17/china-cut... [3] (July) https://www.scmp.com/business/companies/article/3018924/chinas-may-holdings-us-treasuries-dip-third-straight-month-two https://www.scmp.com/business/companies/article/3018924/chin...

Bud 7y ago

Headline should be "Treasuries". What the heck, CNBC. You're a financial network. You can't spell "treasuries"?

sb057 7y ago
https://www.cnbc.com/id/32462271 https://www.cnbc.com/id/32462271 >The short answer is that the "misspelling" is on purpose, done to differentiate Treasury bonds from the plural for the Department of Treasury, though I'm not sure why you'd ever need to pluralize that. In any event, a number of business news organizations, including CNBC, use the "Treasurys" spelling.
- javert 7y ago
  Seems like they are in step with the times. Brawndo: it's what plants crave.
- Bud 7y ago
  That makes no sense at all. There is no plural for the "Department of [sic] Treasury", which, btw, is called the Department of THE Treasury. So if it's done on purpose, that's even more idiotic.
  - somebodythere 7y ago
    Colloquially known as the US Treasury, which could conceivably be pluralized as Treasuries. Some other reasons for the alternative spelling: In many style guides, proper nouns ending in -y are pluralized as -ys, not as -ies. For example, Casey plural would be Caseys, not Casies. Treasury, referring to the type of institution is not on its own a proper noun, but "Treasury", the name of the security emitted by the US Treasury, might be. Another reason for the alternative spelling is in financial settings, the plural of Treasury (notes, bonds, etc.) is abbreviated as Tsys. Treasurys is a reasonable "backronym" for that.
    - Bud 7y ago
      "Might be"? Yes, I suppose. Is? No. "treasuries" is the long-accepted spelling here.

anm89 7y ago

Treasurys? Is that a valid spelling? I always assumed it was treasuries.But I'm assuming they didn't forget to prrof the headline?

geofft 7y ago
Answered in https://news.ycombinator.com/item?id=20721467 https://news.ycombinator.com/item?id=20721467 - seems to be their house style, cf. https://www.cnbc.com/us-treasurys/ https://www.cnbc.com/us-treasurys/
- JumpCrisscross 7y ago
  It’s a proper noun. Treasurys are lots of bonds. One with treasuries has, I don’t know, chests of silver?

rayanami 7y ago

People who are more in the know - is this likely to be part of a long-term trend or is this a short term reaction to recent US-China relations?

largbae 7y ago

As I understand it, other countries' "belief in our debt" has little to do with their treasury holding levels. All countries that net export products to the US tend to end up owning T-bills proportionate to their export surplus. This is because their banks end up with a bunch of US-Dollar-denominated cash from exchanges by the exporting companies, and getting a return of even 1.5% (our 2-year interest rate) is better than 0% on cash. The treasury level rising and falling is not usually intentional or by itself sinister, merely a byproduct of a fluctuating export surplus. This article has a nice illustration of the process: https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/ https://www.theatlantic.com/business/archive/2011/03/infogra... https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/ https://www.theatlantic.com/business/archive/2011/03/infogra...

eof 7y ago
One does not follow from the other. Your explanation would only make sense if the only two choices are keep cash or buy US debt. Of course their holdings have to do with their belief in US debt, those dollars could be spent on many things.
- qroshan 7y ago
  You have to be careful about that sentence. The only other options is to sell $ for another currency. Anything that they buy things that are denominated in $ are usually US imports hence goes back to the net export calculation. Of course they can also use to buy global commodities like Gold, Oil which are denominated in $$, but that is just a proxy for selling $ in foreign exchange and using that currency. So, logically only 2 options. Sell US $ in FX or buy US assets (Bonds, Stocks, Real Estate)
  - largbae 7y ago
    Exactly right. Also you need to think about the sheer amount of dollars that China and Japan have. There are only so many investments that can give you a return on 1 trillion dollars without significantly adding to the risk of losing the principal. Treasury bills are essentially no more risky than the cash that you trade for them.

garryc1304 7y ago

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peter303 7y ago

They are small players compared to the Social Security Trust Fund and the Federal Reserve Quantitative Easement holdings. Both of those total six times Japan or China.

datumy 7y ago

I believe the real reason why China is no longer the largest holder is that, China SPENDS tons of dollars she earns/holds on one-belt-one-road projects. US and western countries are super unhappy about that, as China effectively de-weaponize dollars. China is supposed to earn/hold US paper money and never to spend it. Just my 2cents.

runeks 7y ago
Owning a piece of infrastructure definitely seems more valuable than owning a foreign government bond. But I don’t see how this “de-weaponizes” the US Dollar.

marcosdumay 7y ago

China seems to be having a huge capital flight. It has just removed the peg on their currency price, what is a large giveaway. It's perfectly natural that foreign currency reserves stop increasing or even decrease.