Beijing February 27, the U.S. Treasury Department released a revised version in December 2009 report on international capital flows (TIC) shows that as at the end of December last year, China's holdings of U.S. Treasury bonds worth 894.8 billion U.S. dollars, higher than the 10 days before the announcement of the 7554 billion U.S. dollars, the United States remained the largest single holders of government bonds.
The report shows that China in December last year, holdings of 34.2 billion U.S. dollars of U.S. treasury bonds, U.S. government bonds in recent years, China's biggest monthly reduction.
In fact two days ago, the Chinese Foreign Ministry spokesman Qin Gang has been on the recent issue of China's holdings of U.S. treasuries in response, saying the move was based on market considerations and asset preservation. He said, "about China's foreign exchange reserves, how to manage and operate, we insist on is safety, liquidity, hedging principles, as to what to say when to buy, buy how much is entirely according to market conditions and our needs to decide, in order to be more reasonable configured China's foreign exchange assets. "Qin also urged the United States should take effective measures to ensure market confidence in the dollar.
United States President Barack Obama recently announced arms sales to Taiwan and met with the Dalai Lama's actions after the Sino-US tension. Some voices in China who wanted to sell the U.S. Treasury to counter the United States, which makes Chinese holdings of U.S. Treasury issues a sustained manner.
Beijing February 26, the U.S. Congress's policy research institutes US-China Economic and Security Review Commission held special hearings, the name shall be "The United States on China's debt: the impact and consequences."
US-China Economic and Security Review Commission produce an annual report each year for the U.S. Congress to advise the legislative and policy changes.
For the first time hearing the U.S. national debt
US-China Economic and Security Review Commission Chairman Wessel (Michael Wessel) said that the last two years, the Committee on the hands of China's huge U.S. debt held hearings on the topic, this is the first time.
Wessel his opening remarks at the hearing pointed out that the United States to buy Chinese goods and China to buy U.S. Treasury bonds used to be a mutually beneficial relationship. However, the relationship between the current global economic slowdown of the subtle changes. He said: "China get out of this recession than in the past have become ever more powerful it is hoped that the bank's role as the United States could give it some new political force. While the United States Government is subject to fiscal policy and monetary policy tools, difficult to escape the deepening of China's financial dependence. "
Wessel said that this hearing is to explore this special relationship may be the U.S. economy and US-China relations of the various effects.
Wessel reference to the oil tycoon Paul? Getty words to describe the current China-US relations: "If you owe the bank one hundred U.S. dollars, is your problem; if you owe the bank 100 million U.S. dollars, it is the banks problem."
Another President Cleveland (Robin Cleveland), said China's recent holdings of U.S. Treasury bonds, after a large number of news reports and public discussion, but many of them contradictory viewpoints. Some experts believe that Chinese holdings of longer-term securities, showing optimism about the U.S. economic trends; other experts believe that China turned to short-term investment performance is a lack of confidence.
Cleveland said, "in the next few months, in the end what has been done to understand China and to understand why they do so, are the same difficulties."
Suggestions put pressure on RMB appreciation program
MIT business school professor and former IMF chief economist Simon Johnson (Simon Johnson) at the hearing pointed out that because China holds a lot of U.S. Treasury bonds, the United States to stop the RMB issue to put pressure on China is wrong.
He said that if China stop interfering in the foreign exchange market, the yuan will be greatly appreciated, appreciation rate may be between 20% -40%.
Some people worry that China may not let the yuan appreciate, but the threat of large-scale holdings of U.S. Treasury bonds. However, if you do not buy U.S. bonds, China's foreign exchange reserves continued to increase, will buy what?
Johnson's analysis: If the Chinese buy other dollar-denominated assets issued by U.S. agencies, will pull down these assets and the U.S. Treasury spreads directly to help the U.S. private sector borrowing, so as to stimulate U.S. economic growth; if China's direct purchase of dollar-denominated non-governmental organizations distribution of assets, but also reduce the spread and to help U.S. borrowers; if the Chinese to buy U.S. stocks (which is most likely), will help the stock market and household balance sheets and corporate finance; if China's purchase of non-dollar assets, due to Federal Reserve interest rate close to zero, that would push the low value of the dollar to help U.S. economic growth; and if the Chinese stop buying any foreign assets, which is the same effect as the appreciation of yuan that China stop the foreign exchange market intervention.
Johnson said that if the Chinese sale of bonds or because of the negative remarks have damaged value of the dollar, they will generate huge losses.
Johnson also discussed the U.S. Government can promote the various ways of appreciation of the RMB. In his view, the U.S. Treasury Department in the next report submitted to Congress, China should be a currency manipulator. Chinese threat to sell bonds, "up to a bluff, but also help the dollar. China out of this card, then the U.S. should be with."
In addition, the United States should also get the G20 on this issue, "This year there were two leaders of the Summit, leaders from around the world to solve the problem generally supportive of China's exchange rate."
He suggested expanding the mandate of WTO (not the participation of IMF), the same as the assessment of unfair trade, currency manipulation assessments. Johnson believes that such a re-arrangement "may take several years."
