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Is China Preparing To Divest Its $630 Billion In Eurozone Bond Holdings?
Is China about to start dumping its $630 billion in eurozone debt holdings? Maybe not yet, although the FT reports that China's State Administration of Foreign Exchange, the central bank's foreign reserves manager, has "expressed concern about its exposure" to the PIIGS. Obviously, with China moving away from dollar denominated assets for the past six months would represent a "big strategic shift" as "last year, the Chinese were trying to reduce their exposure to dollar assets by buying eurozone assets. This would be a complete reversal." Additionally a Chinese diplomat noted that, "The euro’s fluctuation will have an impact on China’s thinking, but it’s only one element” in any decision to allow the Chinese currency to rise, He Yafei, a vice foreign minister, said, according to Bloomberg." The question then arises of just what assets China would be comfortable holding? Alas, the only readily available answer we can come up with rhymes it old and has 79 protons.
China, which boasts the world’s largest foreign exchange reserves, is reviewing its holdings of eurozone debt in the wake of the crisis that has swept through the region’s bond markets.
Representatives of China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, has been meeting with foreign bankers in Beijing in recent days to discuss the issue.
Safe, which holds an estimated $630bn of eurozone bonds in its reserves, has expressed concern about its exposure to the five so-called peripheral eurozone markets of Greece, Ireland, Italy, Portugal and Spain.Any move by Safe would mark a significant change in direction, as Beijing has been trying to diversify away from the US dollar in recent years by buying a greater proportion of assets denominated in other currencies.
One investor said: “This is a big strategic shift. Last year, the Chinese were trying to reduce their exposure to dollar assets by buying eurozone assets. This would be a complete reversal.”
A spokesman for Safe refused to comment. An estimated 70 per cent of China’s reserves are held in US dollar securities, but the composition and management of the funds controlled by Safe are regarded as state secrets.
However, analysts point out that Safe rarely cuts its existing holdings significantly as it has so much new money to invest every month.
Instead, it reduces the proportion of new investment it devotes to a particular asset, thereby reducing the weighting of that asset in its overall portfolio.
According to the latest figures announced by Safe, the country’s foreign exchange reserves totalled $2,447bn at the end of March, up $174bn in just six months.
Separately, a Chinese diplomat said he was “worried about” the effect of Europe’s debt crisis and the weakness of the euro on the global recovery and China’s country’s exports.
“The euro’s fluctuation will have an impact on China’s thinking, but it’s only one element” in any decision to allow the Chinese currency to rise, He Yafei, a vice foreign minister, said, according to Bloomberg.
China’s official reserves have been growing at a rapid pace for years, driven by inflows of foreign capital, a large trade surplus and restrictive cross-border capital controls.
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I agree....when do they just say "fuck it" and buy gold?
Someone posted a video yesterday. Chinese are buying like crazy.
Live "top kill" operartion camera:
http://www.businessinsider.com/watch-operation-top-kill-live-here-now-20...
There Gold minors produce for sale in country only, they do not sell out of country..All mined Gold and Silver stays in China..But they expect there mines to be depleted in about 8 years..
The grammar is so bad here I can't even concentrate enough to crack a decent joke. Also, when the Chinese "asset dislocations" hit, you will be able to buy that gold on the VERY very cheap.
This is not going to work for any extended period of time. It may be effective at temporarily sealing the leak, until the pressure blasts through the clay. It will do well enough as a photo op.
as soon as they can recycle enough of their USD timebombs in the vaults.
They are also taking physical delivery of gold from their own domestic mines.
Wow! How did you get such a big avatar!?!?!
Not those pills??
Forget parity with the dollar the Euro is going well below that. Likely they will keep buying the dollar because we are best funny money backed by military supremacy and previously free markets.
Talking about military supremacy, when the next war begins, its going to be telivised in 120MHZ and 3D??
For the best view look out your window
You got it right john, were the tallest midget..
China has been getting fleeced, but they are thinking about standing up to the bully. Stand up to the bully China, the reason they bully is because the are insecure. You too America, stand up to the bullies! Oh you too Europe....
If I were the the Chinese I would not want to be the ones holding the bags, they better move first to dump, because the rest will have no problem throwing them under the bridge and laughing at them about it. China is crazy to be holding so much of a ticking time bomb.
They dont..They turn usd into hards, energy etc yesterday..
Maybe they can start buying crap we make here in the US.
Never mind, we don't make anything real here.
Hey now, hold on, 99.99999% of our exports are superlative finanial products....cough...gasp...splurp...
Awe come on now;
We make and recycle used toilet paper, er, derivatives.
Sounds like China has has agreed to buy more Treasuries... with Europaper.
1.2193 ... time out time out jumping outta the titanic onto the poseidon?
naah...did they dump US Treasuries?? plain diversion tactics...
It's not going to divest 630B worth at once, I can guarentee you that. They may sell them under the radar to the FED with the understanding the the proceeds will go into the long end of the treasury curve.
Say, where can invest in "protons"? Is that a stock or something? Are they going to the moon buy buy buy? What does Cramer say about protons?
Nobody ever 'splains anything to me. You all suck.
I don't know about stocks, but I will be happy to draft a contract that would allow me to sell you protons OTC, electrons and neutrons are free.
I'll sell ya derivative protons!
From a bank too!
https://www.proton.gr/derivativesDaily/newsletter/generateHtml.php
Well of course there is no charge for neutrons.
Bet they are thinking why didn't we dump the euro and us bonds for gold back in July...we would have made a killing.
Oh really !! They used the same exact words few months ago but the target was the USD instead of the EUR.
Anyways talk is cheap and who really cares since the Chinese are the new slaves of the world. They should shut their mouth and keep working so we can keep spending.
The Chinese are printing their money just the same as all the other govt's around the world. The only difference is that they are buying scarce resources with their fiat monopoly money. EU is finding out that these resources (were) on sale and the sale just ended.
Looks like China has a lot of unwanted bonds.
Thank you China for all those FREE sneakers and christmas ornaments. If ya'll ever need anything come see you dya hear?
Not to mention the lethal imitation Heparin.
So is this a SHTF moment?
There if not enough gold. Last time India bought when there was a big junk available. Why didn't China buy it? Because the amounts available just don't make a difference to scale of reserves they have.
Gold bubble? You decide.
A nice graphic to help in your decision.
If it's in a bubble there is some way to go yet.
Korean event is a mean to bring down emerging markets, you will see.
Yes, they are
Shot across the bow.
"Euro going to parity? Not so fast boys"
Bomb China. They have nothing. Their so called 'power' is all posturing. The sooner we get it done, the sooner we can start living as normal human beings. They protect and supply weapons to all evil nations. It is in their best interest to do that and they do so only because they cannot protect themselves. They do the evil work by proxy. I still can't understand the fascination of this country's populace on China. It is a shit place.
That is what china has been doing, buying up resources with their fiat money and treasuries. Supposed that you where a person who had 100 million dollars in the bank, then a family member who is working at the fed comes up to you and say in secret that the govt. is giving up the greenback and is going to print a whole new type of money with the conversion rate of 5 greenbacks/dollars to 1 new currency. Instantly you know that your wealth would be cut down considerably, so what do you do. You start to buy and/or invest in resources, land etc. with your 100 million. When the conversion happens and people settle down after their anger you make more money from your goods that are expensive in the new currency and you keep your wealth and/or even make more than what you had in the old dollars. The Chinese know that the dollar is done, they are using the monopoly money to buy real tangible goods and resources that they will need and the rest of the world will need in the future.
I see the next world war will be called the Resource War of 2029.
China has created the Monster of growing internal Expectations, funded their expansion thru financing American consumers (formerly) insatiable demand for cheap crap (thank you Bill Clinton and Wallymart), and by playing beggar-thy-neighbor better than any other nation.
Everyone that is expecting so-called scarce resources to continue to increase in value, is betting that China can continue the game of smoke and mirrors. Good luck on that bet.
$20 dollar oil and 70 cent copper is coming. People can no longer take out a home equity loan to fill their gas tank, and the world is awash in loaded oil tankers. And China is the only buyer that matters for copper.
Muccha Hai !!
if that happened. i would say it would mean a good buy signal. instead sell us bonds and get a good profit from teh sales. this drves dollr down as well and helps their expost market. sovreigns have an awful ahbit of not knowing when to sell and buy.
choina usuall doesn't say what they are going to do though.
WANDERING BLACKHOLE:
http://williambanzai7.blogspot.com/2010/05/wandering-blackhole.html
Nope, ain't gonna happen. China has Europe by the balls, but Europe effectively has China by the throat in terms of those Eurozone Bonds. If they start even a tricke-selling this will be a clear signal to the PMS-esque market. And China will be taking a haircut, no, make that a scalping, faster than they can sell off the paper.
Even if they do, who'll buy them? The Fed? Wonder how they will spin that to the schmongress and the public.
No, they have to live with the bonds. Maybe they'll start putting more of their people in the EC command centre in the months to come?