Correct if wrong:
With the US/China trade deficit, Yuan was in high demand, low supply. Dollar was in low demand high supply, so China central bank printed more currency increasing Yuan supply to keep it's currency artificially low. China was also buying Dollars with Yuan, which they then used to buy Treasuries effectively loaning US with credit.
How Did China Become One of America's Biggest Bankers?
China is more than happy to own close to a third of the U.S. debt. Owning U.S. Treasury notes helps
China's economy grow by keeping its currency weaker than the dollar. That keeps Chinese exports cheaper than U.S. products.
China's highest priority is to create enough jobs for its 1.4 billion people.
The United States allowed China to become one of its biggest bankers because the American people enjoyed low
consumer prices. Selling debt to China allows the U.S. economy to grow by funding federal government programs. It also keeps U.S.
interest rates low. But China's ownership of U.S. debt is shifting the economic balance of power in its favor.
What Would Happen If China Called in Its Debt Holdings?
China would not call in its debt all at once. If it did so, the demand for the dollar would plummet like a rock. This
dollar collapse would disrupt international markets worse than the
2008 financial crisis. China's economy would suffer along with everyone else's.
It's more likely that China would slowly begin selling off its Treasury holdings. Even when it just warns that it plans to do so, dollar demand starts to drop. That hurts China's competitiveness, as it raises its export prices, so U.S. consumers start buying U.S.-made products instead. China must further expand its exports to other Asian countries and increase domestic demand. Only then can it call in its U.S. debt holdings.
China's Debt-Holder Strategy Is Working
Because of its ability to ship low-priced goods, China's economy grew 10% annually for the three decades before the recession. Now it's growing at 7%, a more sustainable rate. China has become the
largest economy in the world. It's outpaced the United States and the European Union. China became the world's biggest
exporter in 2010. China needs this growth to raise its low
standard of living. Therefore, despite its threats, China will continue its position as the world's largest holder of U.S. debt.
The above shows that China has to keep loaning and buying treasuries to keep Yuan devalued, or they can inflate slowly to not cause crashing of the Dollar, otherwise all their Dollar holdings would become worthless.
This currency manipulation was on going for decades right. Hu Jintao was giving cheap credit during 2008 financial crisis.
Seems to me China has played a long term master plan in finance, I hope this cancels out the BS Rothschild conspiracy because unlike the privately owned FED, China's central bank is state owned like Vietnams.
