Low in the dollars proportion of China’s foreign reserve to 10 years

[ChineseTiger1986]

Low in the dollars proportion of China’s foreign reserve to 10 years to lead the attention of foreign media

BEIJING, March 2 As of the end of June last year, China’s foreign exchange reserves to invest in the proportion of the market has dropped to a low of 10 years, 54%, Chinese purchases of U.S. securities dropped significantly, the proportion of the U.S. dollar in China’s foreign exchange reserves dropped significantly. Wall Street Journal reported that this may mean that China’s strategy to manage the huge foreign reserve has been transformed.

calculated according to the Dow Jones News Service (Dow Jones), China significant decline in the purchases of U.S. securities, a substantial decline of the dollar in the proportion of China’s foreign exchange reserves, which may mean that China’s strategy to manage the huge foreign reserve has been transformed.

U.S. data shows that the end of last June, China’s holdings of U.S. securities slight increase from a year earlier of $ 115 billion to $ 1.726 trillion, the proportion of China’s foreign exchange reserves to invest in the U.S. market has been reduced to 54% of the 10-year lows. However, rapid growth over the same period China’s foreign exchange reserves, the U.S. Securities and accounting for real occasion dropped significantly. The holdings of the U.S. Securities and scale of only 15% of the scale of China’s foreign exchange reserves growth, much lower than in 2010, 45% and 63% of the average of the past five years.

due to exchange rate fluctuations affect the value of China’s foreign exchange reserves, the dollar assets complicate the calculation of the proportion of new reserves. But even included in the valuation impact of dollar assets to buy the U-turn decline is also evident.

, taking into account the upgrading of China’s foreign exchange reserves, and China’s global influence, China’s foreign exchange reserves, the configuration has been an important political issue, is also likely to affect a major factor in foreign exchange and the sovereign debt market.

reported that, with the euro zone crisis, the Chinese foreign exchange reserve funds, or to contain high debt peripheral Eurozone countries rising bond yields and the European rescue Financing Fund a key.
the
analysts have warned that some reservation of the view the U.S. data. U.S. Treasury International Capital System data collection from the millions of records to calculate the overseas investors in U.S. securities positions. But the correction of deviations, especially very difficult to accurately identify the escrow account of a third country on the country of the United States Securities and Usually, this bias will lead to the scale of U.S. Treasury bonds held by undervalued.

the U.S. Treasury Department recently released data show that China has lost interest in the total value of $ 3.2 trillion foreign exchange reserves to try to invest in U.S. dollar, while the debt crisis of the disturbance on the occasion of the European market, may also holdings of euro-denominated securities.

The report also pointed out that economists have long warned that if China started to decrease to buy dollars securities, U.S. interest rates may rise, dealing a blow to the U.S. economy. So far, China has distributed huge foreign exchange reserve and did not cause disturbance. One reason is that in difficult times around the world have a strong demand for hedging U.S. dollar denominated securities.

Overall, the demand of other countries against the U.S. dollar securities remain strong. According to U.S. Treasury data, within the 12 months ended in June 2011, the U.S. dollar denominated securities held by other countries to increase the $ 1.8 trillion.

, these data show that the proportion of the U.S. dollar in China’s foreign exchange reserves have dropped from 65 percent in 2010 to 54 percent, the lowest level in 10 years. Combined with the information released by the U.S. Treasury Department and the Chinese government to do some calculations and found that in the 12 months ended in June 2011, the U.S. dollar denominated securities purchases accounted for only 15% of the increment of China’s foreign exchange reserves, down from 45 in 2010 % over the past five years average of 63%. (BEIJING, Finance Channel)

Low in the dollars proportion of China’s foreign reserve to 10 years to lead the attention of foreign media | Financial Post - Financial News

 

[ahfatzia]

Without going into the actual calculation, I believe China lost somewhere around $200 billion because the rise of RMB against the dollar for the past 2 years. If the US interest rate go up 50 basis points, which is very possible for next 12 months, another huge lost is coming.

 

[HongWu]

China already dumped the US dollar


What Happens When China Stops Buying Our Debt?

What Happens When China Stops Buying Our Debt?

Morgan Housel
February 17, 2012

For years, people have wondered what happens when China stops buying U.S. Treasury bonds. Once China refuses to finance our massive deficits, the thought goes, interest rates will surge, and the Treasury might have a hard time selling bonds (ask Greece what it's like). And if China actually began selling its Treasury bonds... that could bring about something far worse.

But we don't have to wait any longer. China has been a net-seller of Treasuries for the past few months. And not only does the world still exist, but interest rates are near an all-time low. Like so many other stories about the economy, the idea that the U.S. is reliant on China to buy its debt and that hell will break loose when it stops is greatly exaggerated.

China has indeed been a prolific buyer of U.S. debt over the past decade. In 2000, mainland China owned less than $60 billion of Treasury debt. By 2010, it owned more than $1 trillion, surpassing Japan as America's largest foreign creditor.

But those numbers have topped out, and actually dropped, in the last few months:

< >
Source: Treasury Department.

At this rate, Japan will likely reclaim its status as the largest foreign owner of Treasuries sometime this year. As of December, China owned $1.1 trillion of Treasuries, next to Japan's $1.04 trillion.

What's behind China's pullback? The nation is deeply secretive about its financial dealings, so no one knows. But it's likely that after scrapping its currency peg to the dollar in 2010, China no longer has the incentive to hold a "price be damned" approach to buying Treasuries. It also has a vested interest in not seeing Europe's financial system implode, and has been vocal about its interest and commitment to buying European assets. That might take up funds that otherwise would have gone toward Treasuries.

There's also that pesky credibility thing. China's leaders have ridiculed the U.S. for spending with abandon for years. When Treasury Secretary Tim Geithner told a group of Chinese students that Treasuries are safe in 2009, "the comment provoked loud laughter from the audience of students," according to Telegraph UK. That same year, Chinese Premier Wen Jiabao warned:

We've lent a huge amount of capital to the United States, and of course we're concerned about the security of our assets. And to speak truthfully, I am a little bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.

Disturbed by last year's debt-ceiling circus, China may be acting on its fears.

It's also possible that the recent numbers are deceiving. China has been known to funnel some of its Treasury purchases through money managers in the U.K. When it does, the Treasury counts the U.K., not China, as the owner until the data is reconciled once a year. Last March, for example, the Treasury increased China's estimated holdings of Treasuries by 30%, and the U.K.'s down by an equal dollar amount, to reflect who truly owned the assets. But it doesn't look like that's happening this time. Since July, both China and the U.K.'s Treasury holdings have declined. In fact, total foreign ownership of Treasuries fell in December by almost $20 billion -- one of the only net monthly declines in the last five years.

And keep in mind what interest rates have done through all of this. One year ago, 10-year Treasury bonds yielded 3.4%. Today, they yield less than 2%. As a percentage of gross domestic product, interest on the national debt is near a 40-year low.

So if China isn't buying our debt, who is? That's hard to know, but I dug into some Treasury archives to find out how the ownership structure of Treasuries has shifted over the last decade:

< >
Source: Treasury Department.

The U.S. government itself is by far the largest owner of government debt, taking claim to more than 40% of the total pile through the Federal Reserve and various entitlement trust funds. Substantially all the interest paid to the Federal Reserve is remitted back to the Treasury, and interest paid to entitlement trust funds is used to cover entitlement benefits, so this debt is -- in a sense -- interest-free. Since the concept of owing yourself money is somewhat weird, most analysts instead focus on debt owned by the public.

Of the $5 trillion rise in debt owned by the public in the past decade, $3.3 trillion was financed by foreign investors, half a trillion by U.S. individuals, half a trillion by pension funds, and the rest by banks, mutual funds, and state and local governments. Since 2000, China has increased its Treasury holdings by about $900 billion, and Japan by roughly $700 billion.

America's debt load cannot be ignored or belittled. And the ownership structure of the national debt -- particularly the portion owned by the Fed -- creates all kinds of dangerous imbalances.

But American households now own just about as much Treasury debt as China does. How often have you heard someone worry that the U.S. government is too reliant on U.S. households to finance its debt? I never have. But how often have you heard some version of the "China is our banker" line? Too often, I'd say.

Without going into the actual calculation, I believe China lost somewhere around $200 billion because the rise of RMB against the dollar for the past 2 years. If the US interest rate go up 50 basis points, which is very possible for next 12 months, another huge lost is coming.

That's totally baloney. Rise of RMB is simply a recognition of a loss that China already took on its depreciating dollar reserves. Refusing to recognize a loss on paper does not make it go away, it's just self-delusion to pretend a US dollar is worth what it was back in 1998 for example.

 

[FairAndUnbiased]

Without going into the actual calculation, I believe China lost somewhere around $200 billion because the rise of RMB against the dollar for the past 2 years. If the US interest rate go up 50 basis points, which is very possible for next 12 months, another huge lost is coming.

that sort of loss calculation is meaningless because the same loss would've occured either way due to USD inflation and the US has no RMB to give back to China for a resale, so any RMB conversions of loss is fun for alarmists who want us to keep the debt but otherwise is a useless exercise in the real world. RMB's rise makes zero difference in China's US treasury holdings because the US treasury has no RMB to sell back to China; it can only pay in USD and China's USD never gets recycled back into RMB, China can print RMB at will why does it need USD to do that?

and even if we were losing, its time to cut out the losing asset. only fools would keep a losing asset that even the issuers told you, it will depreciate and that they were gonna double the shares and halve the prices, but not to you.