A $278 Billion (Up To $400 Billion) Differential Between China FX Reserves And UST Holdings In Past Year
To further illustrate the point presented in the previous article discussing the variance between the increase in Chinese FX Reserves and UST Holdings, we demonstrate the cumulative differential between October 2008 and September 2009 in these two series. During the time, China's FX reserves have grown by $392 billion, while its UTS holdings have increased by $115 billion: a $278 billion differential. Furthermore, estimates call for the December 31 FX number to grow to $2.4 trillion, which would be a $520 billion increase, while according to TIC we know that October Chinese bond holdings were the same as September. Whether these surged in November and December should be sufficient to determine if there is any validity to the Direct Bidder hypothesis presented earlier.
Regardless, if there is no marked increase in UST holdings in the last two months of the year, the FX-UST differential will hit $400 billion. The question then becomes - where did this extra money go? And why? And, most relevantly, why did it not go into Treasuries (at least according to TIC data).