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Also, people here REALLY misunderstand why China is doing the things it's doing. Their FX reserves are running perilously low. They are looking for ANYTHING th

Also, people here REALLY misunderstand why China is doing the things it's doing. Their FX reserves are running perilously low. They are looking for ANYTHING they can do to get foreign cash. I'm hearing rumors that they are the ones who tapped out the FIMA facility. Could get ugly. I know somebody is going to @ me with the 3T number, but the only data I trust is China's holding of Treasuries. That's been falling quickly.

thriftwy 4y ago
How did China even managed to run out of foreign cash? This is huge news for me. They were always swimming in export profits / probably still are / travel limits since COVID means that obvious leak of travelling and spending abroad is plugged. How could they run out of cash?
- unity1001 4y ago
  They didnt. He is just making it up. China has been dumping US treasuries recently. Maybe he is confusing that with China's foreign reserves drying up. ... In any case, Yuan is the new foreign currency. And China has, well, all of it...
  - reaperman 4y ago
    For clarity, China de-prioritizes T-bills in favor of US Federal agency bonds which are nearly the same risk but slightly higher returns/interest rates. They currently hold $1.2 trillion in federal USD Fannie Mae/Freddie Mac/SBA/FHA bonds. Higher reward, similar risk, still perfectly reasonable USD FX reserves.
  - typon 4y ago
    The last point is all that matters. It will be painful and take a while for Americans to come to grips with it, or we will all die in an apocalypse when they can't accept it.
    - LeFantome 4y ago
      Remains to be seen. It is not clear that China has the rule of law that the world needs in a foreign currency. Even the US has been pushing their luck on this front but they are better than China. Economically, demographics are insanely against China and it is not clear that immigration is a viable way for them to close that gap. Finally, their unique political system has not been tested during a period of low growth. It is not clear they have the political stability to be a reserve currency. Again, the US has been pushing their luck.
    - unity1001 4y ago
      [flagged]
reaperman 4y ago
https://www.cfr.org/blog/chinas-rising-holdings-us-agency-bonds https://www.cfr.org/blog/chinas-rising-holdings-us-agency-bo... > the only data I trust is China's holding of Treasuries - Do you not trust China's holding of US Federal Agency bonds? like Fannie Mae/Freddie Mac/FHA/SBA? China holds $1.2 Trillion of these, slightly higher interest rates than T-bills. - Even at their peak, T-bills only formed <7% of China's USD reserves. You really think China only needed $200 billion of FX reserves and everything else is probably faked?
- neural_thing 4y ago
  <7%? You must be REALLY misreading the data. China now holds <$900B in treasuries. Their official reserve number is over $3T, I'd argue it's probably $1.5T. It's never gone as low as 7%, not even close lol Source on china Treasury holdings - https://ticdata.treasury.gov/Publish/mfh.txt https://ticdata.treasury.gov/Publish/mfh.txt Source on offical China reserves - https://tradingeconomics.com/china/foreign-exchange-reserves https://tradingeconomics.com/china/foreign-exchange-reserves but as I mention, I don't trust this
  - neural_thing 4y ago
    Like, for real, look at the chart in your link. It shows agency debt as being much smaller than Treasury notes and bonds.

thriftwy 4y ago

How did China even managed to run out of foreign cash? This is huge news for me. They were always swimming in export profits / probably still are / travel limits since COVID means that obvious leak of travelling and spending abroad is plugged. How could they run out of cash?

unity1001 4y ago
They didnt. He is just making it up. China has been dumping US treasuries recently. Maybe he is confusing that with China's foreign reserves drying up. ... In any case, Yuan is the new foreign currency. And China has, well, all of it...
- reaperman 4y ago
  For clarity, China de-prioritizes T-bills in favor of US Federal agency bonds which are nearly the same risk but slightly higher returns/interest rates. They currently hold $1.2 trillion in federal USD Fannie Mae/Freddie Mac/SBA/FHA bonds. Higher reward, similar risk, still perfectly reasonable USD FX reserves.
- typon 4y ago
  The last point is all that matters. It will be painful and take a while for Americans to come to grips with it, or we will all die in an apocalypse when they can't accept it.
  - LeFantome 4y ago
    Remains to be seen. It is not clear that China has the rule of law that the world needs in a foreign currency. Even the US has been pushing their luck on this front but they are better than China. Economically, demographics are insanely against China and it is not clear that immigration is a viable way for them to close that gap. Finally, their unique political system has not been tested during a period of low growth. It is not clear they have the political stability to be a reserve currency. Again, the US has been pushing their luck.
  - unity1001 4y ago
    [flagged]

reaperman 4y ago

https://www.cfr.org/blog/chinas-rising-holdings-us-agency-bonds https://www.cfr.org/blog/chinas-rising-holdings-us-agency-bo... > the only data I trust is China's holding of Treasuries - Do you not trust China's holding of US Federal Agency bonds? like Fannie Mae/Freddie Mac/FHA/SBA? China holds $1.2 Trillion of these, slightly higher interest rates than T-bills. - Even at their peak, T-bills only formed <7% of China's USD reserves. You really think China only needed $200 billion of FX reserves and everything else is probably faked?

neural_thing 4y ago
<7%? You must be REALLY misreading the data. China now holds <$900B in treasuries. Their official reserve number is over $3T, I'd argue it's probably $1.5T. It's never gone as low as 7%, not even close lol Source on china Treasury holdings - https://ticdata.treasury.gov/Publish/mfh.txt https://ticdata.treasury.gov/Publish/mfh.txt Source on offical China reserves - https://tradingeconomics.com/china/foreign-exchange-reserves https://tradingeconomics.com/china/foreign-exchange-reserves but as I mention, I don't trust this
- neural_thing 4y ago
  Like, for real, look at the chart in your link. It shows agency debt as being much smaller than Treasury notes and bonds.