China increasing their sales of US Treasuries cannot be good news. Ambrose Evans-Pritchard writing in the Telegraph speculates that the sales are being used as a foreign policy tool to pressure the US. Whether or not that is the case, the US is vulnerable and dependent on China to finance its huge deficits. Any sign of China cutting back or threatening disposing of US reserves or Treasuries is not a helpful to our economy.There are serious foreign policy and defense considerations to being so beholden to another country. China’s reserves are in the neighborhood of $2.3 Trillion. The US needs them to continue to hold what they have got and to add to them by continuing to finance our profligate spending. It is not easy being Blanche du Bois, dependent on the kindness of strangers.
Part of Evans-Pritchard’s piece is below:
A front-page story in the state’s China Information News said the record $34bn sale of US bonds in December was a “commendable” move. The article was republished by the National Bureau of Statistics, giving it a stronger imprimatur.
It follows a piece last week in China Daily, the Politburo’s voice, citing an official from the Chinese Academy of Sciences praising the move to “slash” holdings of US debt. This was published on the same day that US President Barack Obama received the Dalai Lama at the White House, defying protests from Beijing.
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I read this week that Chinese regulators failed to approve the purchase of Hummer, which means death to the brand. I think this was also a tacit rebuke of the Obama administration policies, particularly monetary policy.