From Asia Times, November 6:
China’s stockpile of US Treasuries is at its lowest level in 14 years but Beijing may or may not be wholesale shedding the buck
In the home stretch of a rocky 2023, China and Warren Buffett are warning the global economy that the year ahead could be even more precarious.
Not directly or in tandem, of course. But the financial decisions being made in Omaha, Nebraska and Beijing don’t seem very promising for the 12-14 months ahead.
Buffett’s Berkshire Hathaway conglomerate, for example, is raising its cash position in headline-generating ways. Its cash pile is now a record-breaking US$157.2 billion amid rising global interest rates and a lack of solid investment options.
Xi Jinping’s China is also going as liquid as it can — and rapidly — without panicking investors everywhere. As of the end of August, China’s stockpile of US Treasury securities dropped to the lowest level in at least 14 years.
What’s more, Beijing’s exposure to US government debt has fallen about 40% in just the last decade. Xi’s Communist Party has long since passed the dubious honor of Washington’s top banker to Japan. But at No 2, with $805.4 billion of US Treasuries, China’s selling activity is raising eyebrows in government offices and trading pits around the globe.
Though some might claim foul geopolitical play, there could be perfectly rational economic reasons for Xi’s government to offload US debt. As economist Torsten Slok at Apollo Global Management sees it, “growth in China is slowing for cyclical and structural reasons, and Chinese exports to the US are lower. As a result, China has fewer dollars to recycle into Treasuries.”
Brad Setser, a former US Treasury Department economist, says the suspicion that Xi is exacting revenge on the US “sort of makes sense. China does worry about the weaponization of the dollar and the reach of US financial sanctions. And why would a rising power like China want to fund the Treasury of a country that China views as standing in the way of the realization of the China dream – at least in the Pacific?”
Yet, Setser says, “that is not what I believe is actually happening.” The bulk of China’s post-2012 efforts to diversify its reserves “have come not from shifting reserves out of the dollar, but rather by using what could have been reserves to support the Belt and Road and the outward expansion of Chinese firms.
Those non-reserve foreign assets, strangely enough, seem to be mostly in dollars; almost all the documented Belt and Road project loans, for example, have been in dollars.”....
....MUCH MORE, they go deep.
