Thursday, February 12, 2009

China still likes US Debt

I wrote back in January "Who will buy US Debt?", well it turns out the Chinese haven't really washed their hands of us yet...

According to FT:

China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its “only option” in a perilous world, a senior Chinese banking regulator said on Wednesday.

China has used the dollars it accumulates selling manufactured goods to US consumers to accumulate the world’s largest holding of Treasuries. However, the increasing US budget deficit and its potential impact on the dollar have raised questions about the future Chinese appetite for US debt.

“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

With the $790 Billion Stimulus package, it's becoming clear this strange symbiotic relationship will continue. China and the rest of the World's Economy would crumble if the US Economy were to implode, so in a way they need us, as much as we need them.
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