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Unexpectedly, China once again sold $50 billion of US Treasuries on the evening of August 5! This has been China's accelerated selling of US bonds for seven consecutive months! This move has attracted widespread attention, but what exactly made China make such a move?
First of all, we would like to thank the American Rating Agency for decisively downgrading the credit of the US government. For a long time, we have thought that the US rating agencies are all nonsense and completely pulling the shelf, but this time the US "Fitch Rating Agency" decisively downgraded the US government's credit, which is simply surprising.
I thought that my own people would not beat my own people, but reality tells us: "Nothing is absolute." "The move to sell U.S. bonds is also a reflection of China's concerns about the state of the U.S. economy, which has been volatile and has been severely impacted by the world order." That makes China uneasy about the risk of holding large amounts of U.S. debt.
Therefore, we cannot ignore the uncertainty of the US economy, after all, it has important implications for the global economy. At the same time, China is also paying more attention to domestic demand. In recent years, China has been promoting the transformation and upgrading of the economic structure, striving to reduce dependence on foreign demand, and this move to sell US bonds is also to adjust the direction of capital flow and better support the development of the domestic economy.
China's economy has great growth potential, and we have enough confidence and strength to meet various challenges. In addition, China has also expressed dissatisfaction with some US policies and practices; In recent years, the contradictions between China and the United States in trade, technology, human rights and other fields have gradually deepened, and this sale of US debt can also be regarded as China's response to the United States, expressing our disagreement and dissatisfaction with US policies.
The size of the US national debt has reached a staggering figure of $32.6 trillion, which is an unprecedented amount of debt, even for Americans themselves. Today, the "Federal Reserve" has become the most fierce selling of US Treasury bonds, and even US Treasury Secretary Yellen has publicly accused the country of "internal traitors", making people wonder whether she is referring to the "Federal Reserve".
In May this year, the Fed's dumping of U.S. bonds reached $100 billion, and domestic strife intensified, and the situation was really terrible. The sheer size of the U.S. national debt has attracted worldwide attention, and it's enough to make anyone stunned, after all, it's an unprecedented number.
For the United States, this figure is even more frightening: this huge debt figure gives people an unimaginable sense of heaviness, raising concerns about whether the United States can afford such a large debt burden. In their opinion, the Fed has become the most fierce selling of US Treasuries, and they seem to have lost confidence in US Treasuries and sold them, which undoubtedly brings great uncertainty to the market and makes people start to reassess the value of US Treasuries.
In the face of such turmoil, people are beginning to re-examine the US economic model: "Is the sheer size of the U.S. Treasury debt sustainable?" "Will the Fed's sell-off have a serious impact on the U.S. economy? These issues require in-depth study and reflection, and despite the worrisome situation, we must also believe that the United States has great economic strength and the ability to meet challenges.
According to overseas media reports, the US government recently announced a moratorium on the repayment of Japan's $280 billion debt maturing, which caused the market's credit and confidence in the US government to decline sharply. Japan, which has always been regarded as America's most reliable ally, is now ready to default on its debts, which is an unprecedented situation! More importantly, China has always been seen as a potential competitor to the United States, even a potentially deadly enemy. This news has sparked widespread concern and speculation.
As the world's largest economy, America's credit problems will undoubtedly have a profound impact on the global economy. Japan, as the most loyal ally of the United States, has supported and invested in the US bond market for many years, but the US government's moratorium has undoubtedly caused Japan great trouble. Japan has previously relied on the United States for a stable economy and healthy financial markets
However, it now faces great uncertainty and risks, which will undoubtedly have a major impact on Japan's economic stability and financial system.
At the same time, China has long been seen as a potential rival and mortal enemy of the United States: a bitter contest between the two countries economically, technologically, and geopolitically. The U.S. move will undoubtedly make China wary and worried. China has struggled to improve its power and international standing, and America's credit problems may offer China a greater opportunity to grow.
However, we cannot ignore the reasons and considerations of the US government's moratorium on debt repayment: the current global economic situation is grim, countries are struggling to cope with economic difficulties, and the US government may have made this decision due to economic pressure and fiscal considerations. But in any case, the US move will have a significant impact on global financial markets and the international economic order.
In our view, we should have no illusions about whether the United States will repay China's debt. At the moment, we still have the opportunity to sell these debts decisively on the exchange market, but when the debt matures, if the United States delays repayment, then even if we want to sell, it will be difficult. However, the question does not depend solely on the attitude of the US government, but on what means they have to pay its debts, as a country that has long lost its credibility and is chronically insolvent: "What else can the United States rely on to pay its debts?" ”
First, we can see that the current fiscal situation of the United States is not optimistic. The national debt has accumulated to staggering numbers and the fiscal deficit is widening, which has led to a sharp decline in the credibility of the United States and a gradual decline in the enthusiasm of the international community to invest in its debt. Therefore, it will become very difficult for the United States to find enough money to service its debt.
Second, U.S. economic growth is also under pressure. In recent years, the growth rate of the US economy has slowed, and the uncertainty caused by the trade war has also had a negative impact on the economy. This means that the economic strength of the United States may not be able to support the burden of debt repayment, further reducing the possibility of repayment.
In addition, the United States is subject to domestic political factors. In the U.S. political system, Congress has an important influence on fiscal policy decisions. If Congress cannot reach a consensus on the debt issue, it will be difficult for the US government to take effective measures to repay the debt, which will further exacerbate the difficulty of debt repayment.
As things stand, China still holds $800 billion in U.S. debt, prompting a debate about how to deal with the issue. During June and July, the United States issued another $1.2 trillion in Treasury bonds, and because the US government did not have enough cash on hand, it had to rely on the issuance of Treasury bonds to keep it afloat.
However, the issue does not depend solely on the attitude of the US government, but on what means they have to pay off their debts. As a long-lost and chronically insolvent country: "What else can the United States rely on to service its debts?" ”
China buys U.S. bonds for a number of reasons. On the one hand, China's holding of U.S. bonds can provide a certain hedge for its foreign exchange reserves. In addition, China's purchase of U.S. bonds is also to maintain a balance of trade between the two countries, which to some extent promotes economic cooperation between the two countries.
However, there are some risks associated with China's holding of large amounts of U.S. debt: First, the growing size of U.S. debt could trigger a debt crisis, and Chinese investment is at great risk if the U.S. fails to repay its debt on time. Second, the U.S. government continues to issue Treasury bonds, resulting in more and more debt, which may reduce the value of bonds. In response to this problem, China can take some steps to reduce the risk.
China could gradually reduce its purchases of U.S. bonds while increasing its exposure to other countries' bonds, which would make China's portfolio more diversified and less dependent on U.S. debt. Second, China can actively promote the internationalization of the renminbi, improve the international status of the renminbi, and reduce its dependence on the dollar, so that China can better deal with the risks posed by the US debt. In addition, China can also communicate with the U.S. government
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