China Says Will Make "Tactical Adjustments" On US Debt

Tyler Durden's picture

Following the latest TIC report, which showed China dumping over $40 billion in Treasuries in October, bringing its total to the lowest since 2010, and at $1.116 trillion sending China below Japan only for the second time in the list of top US creditors, questions emerged about China's strategy on US debt holdings.

 

Today, this specific question that was addressed by an official at China's State Administration of Foreign Exchange (SAFE), who calmed nerves and told US reporters at a briefing that while China will make "tactical adjustments" on its US debt holdings, Beijing's long-term investment view on US debt has not changed, adding that U.S. Treasuries are China’s long-term strategic investment targets as MarketNews reported.

When asked if China is strategically cutting its US treasury, he replied "absolutely not" adding that it is difficult to forecast value of U.S. dollar and U.S. Treasuries according to Bloomberg.

He also said that there is no barrier for foreign companies to transfer investment returns out of China as long as they comply with relevant rules.

Of course, whould Trump push aggressively for trade concessions, especially following the appointment of Peter Navarro, and demand a decline in Chinese exports to the US, ostensibly by imposing tarriffs, it is likely that China's tactical adjustments will acceleration the recent one-way liquidation trendline.

Shifting from bonds to the other topic du jour, namely China's reserve outflows, the official said China would step up enforcement of existing policies to ensure forex market stability, and that forex reserve fluctuating around a certain level will be the norm.

However, in a rather surprising admission he said that it is uncertain if China’s forex reserves will increase or drop, and said guidance is needed on China’s outbound M&A deals.

Finally, he said that SAFE would cooperate with customs, tax authorities and police to crack down underground banks and fake trade, stating that it’s good timing to push ahead reforms on inflows, such as allowing foreign investors to access bond market.

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SenselessPanic's picture

if the bank owes you 20 trillion ... that's your problem

Max Hunter's picture

In order to stay pegged to the USD... and that peg to be to their advantage 7:1... they need to keep our paper instruments in their portfolio.. 

Muddy1's picture

Interesting graph.  Recent articles on ZH had me thinking China was dumping their Treasury's at a fire sale rate.  OMG, what will Merica do?  Now I see we are merely back to 2008 levels.  Yawn, the sky is still up there.

VinceFostersGhost's picture

 

 

China Says Will Make "Tactical Adjustments"

 

Might want to consult the Donald before you do that.....cause we're gonna be making some adjustments......of our own.

KittyKittyBangBang's picture

librurds wanna bust the don fir putin stopin hitlery from stealin da electin ... ... HA HA HA

https://www.accredited-times.com/2016/12/22/john-podesta-confirms-putin-...

Mr.Sono's picture

If they stupid enough to buy our debt, let them. But I do see a problem with that statement. They get to build there productivity while we destroyed ours.

Déjà view's picture

Drone submarine 'stolen' by China...revealed depth of American Sea Of Debt...

A. Boaty's picture

All your drone is belong to us.

Verlorenes Geld's picture

Remember the KSA's "threat" to also unload US Securities if the 9/11 Bill were to pass?  Tactical Unload Option NOT taken, I s'pose.

MEFOBILLS's picture

This is true.   TBills keep peg.  China acquires dollars because they are mercantile, meaning they export more than import.  Trade imbalance in their favor is China policy.

Acquiring dollars allows actions to China's advantage:  1) Dollars can be spent on mainstreet American goods.  2) Dollars can be spent on dollar zone economies  3) Dollars can buy debt instruments like a TBill.

1) Mainstreet American goods like high tech can be bought and then studied for reverse engineering.  In general , the idea is to not buy from mainstreet but instead buy from wall street (debt).

2) Dollar zone economies like Africa and South America have minerals that are needed.  Also, in parallel, one can make Yuan deals, thus shifting thier economies to China's advantage.

3) TBill is really a bond.. a debt instrument.  Actions for bonds are price high, interest rate low.  Or, price low, interest rate high.  Memorize this inverse relation - it is important.  American banker policy is to keep dollars as reserve, and as petrodollar.  Ergo, she sells her debt.

So, by buying or not buying TBills, the exchange rate can be kept in a window.  The objective is to always keep China exports up in mercantile territory, to then steal jobs in wage arbitrage.  Job stealing then moves whole industries to China, which allows quick movement up to first world status.

In meantime, the excess dollars are used to influence Africa and South America.  

Wall Street finance and international banksterism is in on the China gambit, and Wall Street bribes Senators via 17'th ammendment - so the selling off of America and lifting of industry continues.  To add further insult to injury, taxpayer funded American Navy keeps water-ways safe for China to transit their mercantile "goods" back to America, to then import at low or no tariffs.  Join the Navy!

Can you say that American's are fully parasitized by finance- and this makes them act STOOOOOOPID?   Stooooooooopied.

American brains are so parasitized by (((Finance games))) it is surprising they can walk without drooling.  Washington's brain function is working for other foreign entities, not the welfare of American mainstreet goods producers.

America's patrimony has been sold cheaply for wage arbitrage.  

patriotinCalif's picture

Wow that is really good analysis. I never realized that until you said it. That is the real reason for China to hold our debt. So they can get dollars for wage arbitrage. 

Surely Trump's trade masters understand all this and know how to kill it?

LMAOLORI's picture

 

 

 

 

If you owe the bank $10,000 that's your problem.  If you owe the bank $1.116 trillion you OWN the bank and that's the bank's problem.

 

Fixed it for you.

JohnGaltUk's picture

Calming the markets before a big dump.

buzzsaw99's picture

they should not be allowed to buy us treasurys. they sure the hell shouldn't be allowed to buy us treasurys with the 10Y over 2.5%. They should get the same shitty "Class B" crap deal that they give outsiders who invest in them. To me that means 30Y treasurys at 0.5% bitchez and bottom tier everything else.

truthalwayswinsout's picture

China can do what they want with Treasury debt. Once you buy it the only way to do something about it is wait until it is mature or it is redeemed. Otherwise you have to sell into the open market.

So who the fuck cares what they do with the debt.

Up until a few months ago, treasuries were one of the best deals on the planet as they appreciated in value as interest rates fell. Now with a slight uptick they are depreciating and China has a quadruple wammy.

It is faced with renegotiation of US China trade where it will continue to do a lot of business but no longer be able to rip us off doing it.

It is faced with massive currently outflow where all the rats in China are leaving the sinking ship.

And it is faced with the collapse of most of its manufacturing companies from massive overcapacity and falling sales.

And it is faced with 1000's of riots each month from pissed off workers being screwed.

In reality they are selling treasuries because they have to.

Whoa Dammit's picture

China is a U.S. plantation. A globalist owned bananna republic on steroids. They won't do much if it negatively effects their market share.

wholy1's picture

The ONLY thing to do with "debt" is A-V-O-I-D.  It is one of the most "consequential" four-letter words beginning with FEAR and HATE.

Arnold's picture

When a white guy goes batshit crazy, I may have a clue in advance.

When a Chinaman goes batshit, I have no clue.

nah's picture

Chinese like our debt

.

and we like the Chinese food

.

They have internet and a strong industrial base

.

Please China don't destroy America we are prettier together

highwaytoserfdom's picture

 

gold with Bitcoin 

 

Herdee's picture

Running out of money, especially if U.S. puts big border tax tariffs up. 20% on imports will destroy the bigest marketer of Chinese products which is scum WalMart.

Bill of Rights's picture

Lol its only debt if it plans on being paid back. Remember the Chinks owe us a  trillion as well.

 

http://juneauempire.com/opinion/2012-05-23/chinas-secret-it-owes-america...

General Titus's picture

Never forget what the Clintons and their Neocon comrades destroyed our nation for a few tens of millions of dollars in illegal campaign donations from Communist China. China Gate should have taken down the entire Clinton Administration & the DemocRat Campaign Finance Committee.  They made US as well as China, what they are today

bankonzhongguo's picture

China's strategy (like normal) is to do nothing and allow the world to revolve around them and then pretend they thought it all up by themselves.

In this case, China may keep UST around the $1 trillion level - knowing that the US continues to issue mathematically unpayable amounts of debt - making their portion (and risk) smaller in time.

They do "nothing" while their debtor continues to spend recklessly.

If it becomes a crisis to have the Fed be the only debt buyer, then that is what risk and pricing is for after all.

China's near term national goal (like a Moon Shot) is to surpass the US in gold reserves by stealth purchases at the sub $1400/oz price and mine their own reserves internationally.

10 thousand tonnes domiciled in the Motherland is the goal.

Then China's policy leaders can chart a course for the next hundred years.

 

MEFOBILLS's picture

China want's a SDR basket to include Gold, certain national currencies - including China's Yuan, and select goods.

In meantime, China is setting up many new Eurasian structures.  In these structures she is either the leader or a first partner.  

The next 100 years include eclipsing the West, with the center of gravity shifting to Eurasia.

Those of you who keep dismissing China, need to wake up and smell the tea leaves.  Temporary setbacks need to be seen in context.  

America is probably going to Tariff up soon - it is already being floated by Trump's team.  This then makes the former China gambit (stealing through wage arbitrage and mercantilism) more difficult, so she has to pivot faster to Eurasian strategy.