China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium

Tyler Durden's picture

When the latest Treasury International Capital data was released yesterday, many were quick to conclude that not only had China's selling of US Treasury ceased, but that with the addition of $7 billion in US government paper, China's latest total holdings of $1270.3 billion were the highest since May of 2014. And if one was merely looking at the "China" line item in the major foreign holders table, that would be correct.

 

However, as we have shown before, when looking at China's Treasury holdings, one also has to add the "Belgian" Treasuries, which is where China had been anonymously engaging in a record buying spree via the local Euroclear, starting in late 2013, which however concluded with a bang in early 2015.

This is what we said last month:

  • "Belgium" is, or rather, was a front for China: either SAFE, CIC, or the PBOC itself.
  • That Belgium's holdings, after soaring as high as $381 billion a
    year ago, have since tumbled as China has
    dumped the bulk of its Euroclear custody holdings, and that once this
    number is back to its historical level of around $170-$180 billion,
    "Belgium" will again be just Belgium.
  • China's foreign reserves plunged concurrently and this was offset by a the
    biggest quarterly drop in Chinese pro-forma treasury holdings, which
    dropped by a record $72 billion in the month of March, and a record $113
    billion for the quarter.

It wasn't precisely clear just why China, which had historically used
UK-based offshore banks to transact in US paper in addition to the
mainland, would pick Belgium (and Euroclear) or why it chose to hide its transactions in
such a crude way, however the recent acceleration in capital outflow from
China manifesting in a plunge in Chinese forex reserves, coupled with a
record monthly liquidation in total Chinese holdings, exposed just where China was trading.

So with the benefit of the TIC data, we know that China's Treasury liquidation has not only not stopped, but has continued. Enter, once again, Belgium, only this time it is not a "mystery" buyer behind the small central European country's holdings, but a seller.

As the chart below shows, after a record $92.5 billion drop in March, "Belgium" sold another $24 billion in April, and another $26 billion last month, bringing the total liquidation to a whopping $142.5 billion for the months of March, April and May.

 

This means that after adding mainland China's token increase of $7 billion in May after a $40 billion increase the two months prior, net of Belgium's liquidation, China has sold a record $96 billion in Treasurys in the last three months.

 

Just to confirm that one should add the dramatic changes in "Belgium" holdings to mainland China Treasury, here is a chart overlaying China's Forex reserves, which as we learned today had dramatically increased by 600 tons of gold, but more importantly forex reserves declined to $3.693 trillion, a drop of $17 billion from $3.711 trillion the month before, and the lowest since September 2013!

Putting all of this together, it reveals that China has already dumped a record total $107 billion in US Treasurys in 2015 to offset what is now quite clear capital flight from the mainland, and the most aggressive attempt to keep the Renminbi stable.

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XAU XAG's picture

LOL

 

Now you know where they got the money to increase thier gold stock,,,,,,,,,sold treasurys

HonkyShogun's picture

And the Fed will keep buying those USTs so everybody wins, right?

Renfield's picture

Of course! Just ask Japan about its great success lately under that plan.

TeethVillage88s's picture

Great thing about Japan's plan is that little of their debt is held by other countries or foreigners.

The PIIGS had a big problem with this in 2011 which is the last data I found in FRED. Ireland looked the worst if I remember correctly. I can't think where their debt disappeared to. Debt doesn't just disappear does it.

But I might not know what I am looking at Exactly.

International Debt Issues to GDP for Ireland
2011: 237.24410 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07IEA156NWDB,

International Debt Issues to GDP for Japan
2011: 7.49463 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07JPA156NWDB,

Renfield's picture

This is a point that many good analysts also raise. Internal vs. external debt, from what I understand, is the difference between a nation's survival and its bankruptcy. I'm no expert either of course. But this makes sense to me, since debt owed mainly by private entities (who would have to default) within the country obviously isn't going to hurt the nation's government, except for indirectly (e.g., GDP numbers).

Hence, China's 'hard landing' may not be as 'hard' as the official figures may show. (I think a lot of debt in China is held by private enterprises, not the government.) For example, the US tumble will be quite hard by comparison, as it owes so much government debt to foreigners. Your comment below shows how deeply the US will be in trouble as that foreign debt goes bad. (At least, as much of it is as genuinely bought by foreigners.)

The trouble is, that Japan buying all its own bonds means no new credit coming into the country, yet Japan is still extending credit to others (buying their bonds) as well. So they're twice screwed.

SimplePrinciple's picture

The problem with too much internal debt is that you cannot pull an Iceland, default, and get on with your life.  Instead, you are stuck with having to feed your own people with government revenues apparently in a currency nobody else wants.  Wonderful future, Japan.

Down to Earth Thinking's picture

if buying your own T's is a win ?

HowdyDoody's picture

Strong dollar and weak gold - the US always liked collateral damage.

papaswamp's picture

There will be a sudden sprint for the liquidity door. or China needs more ching to hold up their own market when they start lifting the gun barrel from sellers.

Remington IV's picture

China's fucked ... short the shit out of them

InvalidID's picture

 

 This is my take as well, China isn't running from T-Bills, they are stocking up on powder....

Renfield's picture

Fantastic detective work, Tyler. This report on the 'markets' (vs. government announcements of various kinds, which are never to be believed) is real journalism that gives me a window on what little remains of price discovery. It takes thought and logic to piece together what's really happening, that the announcements and slippery official numbers seek to hide.

Far too little of this going on out there (and almost none in the MSM)... a financial blog should never just accept the official advertising at face 'value'.

TeethVillage88s's picture

I appreciate the reporting, but every time I see this in ZH or the Golden Jackass... my numbers always show the trend is big in buying US Treasuries. There is no shortage of buyers of US Treasuries and as Martin Armstrong points out there is no other place to park your money than in US Bonds.

http://www.treasury.gov/ticdata/Publish/shl2002r.pdf
http://www.treasury.gov/ticdata/Publish/shla2013r.pdf
(http://www.treasury.gov/ticdata/Publish/mfh.txt)
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm

Last Data is from January 2015.

Belgium 2002 = $10.8 B, then 2013 = $163 B, Today $354 B
Bermuda 2002 = $14 B, then 2013 = $94 B, Today ??
Cayman Islands 2002 = $10.7 B, then 2013 = $66 B, Today ??
Canada 2002 = $8.4 B, then 2013 = $46.6 B, Today $70 B
China 2002 = $95 B, then 2013 = $1,272 B, Today $1239 B
France 2002 = $11 B, then 2013 = $42.4 B, Today $75 B
Germany 2002 = $38 B, then 2013 = $54 B, Today $69 B
Hong Kong 2002 = $37 B, then 2013 = $89 B, Today $172 B
India 2002 = $5.2 B, then 2013 = $56.6 B, Today $91 B
Ireland 2002 = $6 B, then 2013 = $91 B, Today $137 B
Japan 2002 = $260 B, then 2013 = $1,023 B, Today $1238 B
Luxemburg 2002 = $20.2 B, then 2013 = $107 B, Today $176 B
Mexico 2002 = $16.7 B, then 2013 = $52.7 B, Today $85 B
Norway 2002 = $5 B, then 2013 = $74 B, Today $73 B
Philippines 2002 = $3 B, then 2013 = $36 B, Today $40 B
Poland 2002 = $7 B, then 2013 = $31 B, Today $29 B
Russia 2002 = $3 B, then 2013 = $138 B, Today $82 B
Singapore 2002 = 19.4 B, then 2013 = $82 B, Today $109 B
Switzerland 2002 = $28 B, then 2013 = $157 B, Today $205 B
Taiwan 2002 = $0 B, then 2013 = $183 B, Today $170 B
Turkey 2002 = $2 B, then 2013 = $18 B, Today $82 B
United Kingdom = $45.7 B, then 2013 = $130.6 B, Today $207 B

Renfield's picture

TV: Those are official figures, are they not? (Treasury & news release sources.) Hence, one could also accept the "Belgium" figures on that list at face value, but here Tyler has done some work beyond simply the face figures.

I suspect that one would find Yellen (or some other shadow buyer) behind many of these official numbers.

I did not down-vote you, BTW. I'm just not sure how real a lot of those numbers would be, since as Tyler shows "Belgium" is not a real number, hiding one or more shadow buyer behind these official buyer names.

TeethVillage88s's picture

No Problem.

Yes, they are official numbers and I have heard there is some funny stuff going on from the Golden Jackass.

My numbers are not up to date. Belgium is now (May 2015) showing at $202 Billion versus what I had from January like $354 Billion.

I may not remember the sequence correctly from the ZH Reporting. Belgium was at $354 Billion for a long time, but went down in Mar 2015.

The delay in Treasury Posting of numbers causes a problem, that ZH or the Golden Jackass can "Scoop".

If Treasury is tweaking numbers or the State Department who may register the treasuries overseas... I still don't see where the sales have shown up to be missing from China or Hong Kong.

There is another story out there that the Silk Road Project in China will cause China to sell USTs. Not sure if they will. I understand China just takes money from it's state banks and never has to pay back Loans.

The Greatest Lie ever Told may well be that China has Capitalism, Real Markets, Real Banks, and Real Financial ratings... China & the USA what a pair they make!!

old naughty's picture

In-deed.

A chi-mera is a two-headed beast, joined at the hip.

They don't bite, or spew fire on, each other, but everone else.

Bay of Pigs's picture

Belgium at $354 billion? And Luxemburg at $175 billion? LOL. Looking at these numbers, all I see is a FED UST Ponzi.

"The GDP value of Belgium represents 0.86 percent of the world economy".

http://www.tradingeconomics.com/belgium/gdp

"The GDP value of Luxembourg represents 0.10 percent of the world economy".

http://www.tradingeconomics.com/luxembourg/gdp

TeethVillage88s's picture

Todays(May 2015) from link Belgium, $202.8 Billion (Down), and Luxembourg, $177 Billion.

USA being Super Power, being at War, and having a 2008 Global Financial Crisis also plays into this.

Global War on Terror, a Crusade, G.W.B said. You are either with us or against us.

Trends sometimes are created by TPTB. They say times are going to be more unpredictable, so you better store up some wealth and the best place will be Uncle Sam's UST.

Obviously I'm not an Insider. NATO has been playing secret armies and secret games with the USA since the end of WWII. I don't know who controls the USA, but NATO & Europe seem to follow the same boss.

Notice old time US Friends somehow managed to buy more US Treasuries... and those that wanted to be friends bought more USTs.

Luxembourg, Cayman Islands, Bermuda are Tax Havens for the Wealthy.

delivered's picture

TV88. Your analysis is correct but also highlights a huge problem. That is, just look how much paper the US has dumped around the world. No discremination here as everyone's been polluted with this toxic crap. If you remember the MBS storm, countless countries around the world were hood-winked into buying that crap from the pushers on Wall Street. Needless to say, that didn't end very well.

Fast forward to today and we have the same problem as the world is awash in this crap. About the only difference with the "paper" is that US debt is guaranteed by the US government (which by the way is technology insolvent) whereas the MBS debt was guaranteed by worthless real estate and insolvent consumers. And look at Japan, a whopping increase of $260 billion to $1.238 trillion (thanks to their printing presses as well as they printed Yen, sold them to devalue, bought dollars and then converted them into USTs). 

So the huge problem that the world has gotten into is the illusion that US debt is the only place to park your money as the last safe haven location. This I believe is true as there's no other market that could even possibly begin to handle an exodus of US debt positions. The reason for the increases is not because of "safety" but rather a result of "by default". There is just no other market in the world to park huge amounts of capital so US debt becomes the overnight parking lot so to speak. 

So basically everyone on this list is damned if you do and damned if you don't in terms of placing funds. If they do decide to exit, all hell will break lose. If they don't and continue to accumulate, they increase their risk and exposure to a sudden event with the US. The bottom line is that every world finance leader clearly sees this problem but has no fricking idea how to get out of it and rebalance the destablizing risks associated with the global economy becoming overly dependent on one form of investment. 

Can this go on for a while longer, probably and maybe even another 3,5, or even 10 years? But when it finally comes to an end as all debt orgies do, the exodus from the UST market will absolutely be stunning.

These poor countries got fooled again as one of the best statements I've ever come across about the US (can't recall where I got it from) was that the US's greatest achievement in the global debt markets is not centered in creating debt but will be in the US's ability to find a way not to repay the debt. 

 

COSMOS's picture

Sure there is a market, its called Precious Metals, where one had park huge sums of money.  That is why the Chinese and Russians are now buying Gold and Silver instead of USA T Bills.

lakecity55's picture

You beat me to it! PMs are the hedge against the cleanest dirty shirt.

TeethVillage88s's picture

Yes, quiet a few problems are highlighted here.

I'm not disagreeing with you at all.

- Other Bond Markets much smaller than the US Market is a problem

- Political, Geopolitical Issues, Superpower status of the USA, GWOT, a Divide between Islam and the West, US Continuous Wars & Continuous spread of Bribe money around the world, US & China Hegemony

- Not enough Gold or Silver in the world to use as money

- 2008 Global Recession, Economic Crisis, Financial Crisis, Debt Crisis, Credit Crisis, Bank Linkages Crisis(Contagion)

I imagine the US will smile, talk sweetly, console other people and their officials... sure you can sell your UST, but first tell me what you would like to invest in... what else is there? I just want to give you the best advice and help that I can...

- Power, Real Power exists in the world and is held by those that are aggressive, bold, Determined, Willing to go to war and test their weapons and men/women, and ... they know how to wield money, use gifts and money secretly to build networks and alliances

I struggle to write about power, since I know only a little.

American Power must be very like Europe as this is where the strategies, methods and tools originated.

I think much of the UST Purchases is due to US Power, but could be compensation for bringing the world close to a war between the USA & Europe.

conscious being's picture

The original fiat, introduced in China, was issued by the Mongols under Kubla Khan. It basicly said, 'Accept this piece of paper at face value for your good, or ... get your head chopped off.' Much like the $ today, it is threat and force, incapsulated..

 

COSMOS's picture

Not enough Gold or Silver in the world to use as money

But of course there is, the Romans varied the percent of silver in their coins depending on the 'value of silver and what is could buy at that time'.  One can use from a wide variety of precious metals.  If one allowed true markets to find the true price of the metal then there would be no problem having enough gold and silver for all your currency needs.  The problem is the suppressin in the price, and the printing of an enourmous amount of fiat.  BY fixing the price of gold in the markets and then printing fiat out of control of course at those prices you dont have enough gold for all the currency.  The markets are in disequilibrium.  Lock up the crooks and let the world react appropriately to the massive amounts of dollar fiat by turning their backs on it and its problem solved.

TeethVillage88s's picture

My position is one of Logistics.

In June 2013, the Population Division of the United Nations Department of Economic and Social Affairs estimated the world population at approximately 7.2 billion.[5]

I am very much in favor of building reserves of precious metals, rare earth minerals, stock piles, and war reserves.

But most people I have talked to in recent years who are interested in leaving the Fiat don't really have a plan. They might have some silver since it is cheaper than gold.

My guess is most people don't have any gold even if they suggest going to a gold standard.

I agree USA & Europe & Latin American should create a basket of goods to back up their currency.

But just looking at the value of all the US Gold Reserves/Deposit Receipts of the FED or FT Knox... it doesn't even add up to a Trillion I don't think. I have some numbers some place related where I converted Tons to Oz.

I guess the silver money from Rome was often clipped of pieces of silver. Kind of a problem. Maybe paper money backed by precious metals is what we want.

Now let me show my ignorance. If we want to avoid having to create debt when we create new money... we also have to simplify accounting, taxes, finance, financial ratings, and Corporate Auditing. End Lobbying and gift giving in government. And keep the Lawyers and Politicians from ruining simply laws, simple accounting, and simple processes.

Soul Glow's picture

There is no shortage of buyers of US Treasuries and as Martin Armstrong points out there is no other place to park your money than in US Bonds.

Which is why the Fed had to buy trillions worth of USTs.  Right?  Right??

HAHAHA!  Good joke!

:)

Bay of Pigs's picture

Yes, and yet another reason to dimiss good ole Marty and his great TA work.

conscious being's picture

The State broke Marty on the wheel. Now he's different. He has my sympathy.

Winston Churchill's picture

Now the Chinese have been caught out,kudos Tyler, trying to unload their

UST's on the sly, those exits must be looking really tiny for other holders.

They may just decide to panic first, and Yellen will get her higher interest rate in

spades.

20%+ on the ten year note would be fun.1970's here we come.

lakecity55's picture

Most of my commercial bond money went into USTs. I think the bond market is headed for trouble. Everything else is invested in moar durable items.

My Dad said buy some USTs years ago, next to gold, they will be worth something unless the government falls, which could happen any day now, but he told me that in 1967.

Son of Loki's picture

Pew-eeeeee.

 

That Dump was Big and Smelly, too!

 

The PRC may be predicting a serious correction in the Treausry market.

stormsailor's picture

heh, heh,  the federal reserve just makes up some digits and buys them, no big deal

buzzsaw99's picture

yeah, it's really big probrem for janet :roll:

Winston Churchill's picture

Then the dollars created by Mr. Yellen buying up those UST's get spent.

Can you spell hyperinflation for 100m dollars Alex?

COSMOS's picture

The problems are going to be for the countries in Africa and South America who take those dollars from the Chinese for their natural resources.  THey are going to be the ones left with the hot potatoes in their hands when the dollar crash happens.  IF the USA imposes currency controls and deems all external to USA physical dollars worthless as it revalues the currency and issues the NEW dollar.  The trillions of dollars in South America and Africa will be worthless.

Bay of Pigs's picture

Pretty clear the Chinese have between 10K to 30K tons of physical gold now and are preparing for the end of the USD as the world reserve currency. Todays annoucement from them was absurdly low.

The coming reset on PM's, bonds, stocks and currencies will be epic.

lakecity55's picture

I just got a box of Ag. Let me open it before it's lost again.

I'll be back.

MFL8240's picture

If the Federal Reserve buys all the debt, they can raise rates and pay themsleves more interest!  ahahaha, this is the ponzi scheme of the century!

NihilistZero's picture

I've been saying this for sometime. Rates are going up AND there will still be QE. Awesome accounting gimmick as the "interest" goes right to the general fund. This is how it will be until it can be no more. You are paying off the national debt everyday when you buy a bag of chips that's half the size and cost twice as much as 5 years ago. The only thing that's made this run of stagflation more bearable than the 1970s is the sad yet efficient mechanisms of the modern welfare state. Monetary Meth for the markets and Welfare Opiates for the masses.

Yen Cross's picture

 I'd like to know what Slavic state you "hail" from?  Ever heard of inflation? (hyper-inflation)

 People consume/buy products because they're cheap and have good value. The market(demand) drives price higher.

 How does printing more money and raising rates achieve that goal? If demand doesn't exist>eg; over capacity~ devaluation, and loss of purchasing power.

  People used to buy Asian products because they were perceived as a "good value" and reliable. Now people buy Asian SHIT because it's all they can afford.

conscious being's picture

Yen, you've always been a funny cat. Who wants to trade forex, on margin, in a fixed, croney, market? Who would advocate such a thing?

 

Yes, more money in circulation effectively lowers relative prices, increasing demand. See Weimar wheelbarrows. They had efficient producers as well. Look at Maslov's hierarchy to determine which category of products will inflate the most.

bid the soldiers shoot's picture

Who was the buyer?

Yellen's printing press?

Chuck Knoblauch's picture

Who else would accept the trash as collateral to buy hard assets in the US with US funny money?

silverserfer's picture

Tyler, make a "I got mindfucked on ZH" coffee cup and cap to sell in the ZH store.

Ms No's picture

I'm still waiting for the hoodie sweatshirt.  Although, I am probably too chicken shit to buy one directly from the site... from here in the faraday cage and all.  I noticed another location selling Hedge shwagg recently. 

Figure it may be prudent to have one.  That way we can identify each other... you know.... at the camp. 

lakecity55's picture

I have mine, P6543. I just saw P8987 at the chow hall. Card game tonight.

RagnarDanneskjold's picture

The change in forex holdings are tracking the change in the yuan. Which makes sense because the PBOC prints new yuan every time it sterilizes US dollars. When these dollars are sold (if they're not being swapped for another asset, which is the case since reserves are falling) the existing yuan are increasingly unbacked. 

Why Did China Announce Its Gold Reserves? Yuan Depreciation Pressure
kchrisc's picture

When the music stops, those holding paper will be sad.

Those holding dollar denominated paper will be the saddest of all.

Liberty is a demand. Tyranny is submission.

Chuck Knoblauch's picture

A downpayment for Greece????

Buying mineral rights on Indian reservations in the US???

The Chinks want those American guns confiscated Barry!!!

July 27th is right around the corner.