Guest Author Blog: The report that China is lightening its load of US treasury debt, open as it is to multiple interpretations, is the sort of thing that keeps markets interesting.
The $34 billion drop in its holdings is a substantial chunk of change by anybody’s reckoning and deserves to be taken seriously. At least it deserves to be taken more seriously than in the last administration when the prospect of Chinese dollar dumping was called “absurd” by Secretary Paulson and “foolhardy” by President Bush.
In reducing its portfolio – Japan is reported to once again be the biggest holder of US debt – perhaps China is firing a warning shot.
Or maybe there is no message intended at all.
Some have suggested that it’s just a function of the way the data is reported, that China could be buying from offshore locations, its holdings transactions simply not picked up and attributed to them. Or in the alternative, that China is just briefly on the sidelines, not replacing maturing instruments in the expectation of somewhat higher rates soon. In either case, goes the sanguine interpretation, the Chinese share of US debt funding is more or less secure.
But there may be a specific message behind the move.