China to 'liquidate' US Treasuries, not dollars

The debt markets have been warned.

A key rate setter-for China's central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.

"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."

"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.

To my knowledge, this is the first time that a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.

We don't know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank's FX arm. The figure is thought to be over $2.2 trillion...

The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.

Mr Li, one of three outside academics on China's MPC, described the debt deals on Capitol Hill as "just trying to by time", saying it will not be enough to stop America's "debt dynamic" turning dangerous.

Source

Does anyone still regard China as some overrated 3rd-world upstart? Well if you read the full article Mr Li is talking about China looking to invest $10 trillion in US assets (-if allowed). A player with that much clout can make game-changing calls - and initiating the liquidation of over $2 trillion in US treasuries would certainly come into that category.

The whole debate about whether China would like to bring the dollar down becomes less ambiguous if these policies transpire into reality; it's not that China wants to bring the house down - rather they want to use whatever safe assets the US might have as homes for their investment capital.

(Unfortunately it seems they no longer regard US treasuries as safe investments...)

Sorry but stupid question, What does liquidating mean?

The way they're using it basically means instead of us paying them back they want the money we owe them to go into shares of the main companies mentioned in the OP' post.

I wouldn't have a problem with that to be honest... maybe not boeing. Apple or Intel have at it; but I don't think having some of our top engineers mingling with china's govt would be healthy for the U.S. Could be very costly militarily. Not to mention treasonous?

I dunno


I was reading a thread here early that was exposing the fact that China may have been cooking their books.
I'll try to find it.

ETA: Read all about it...

China's Debt Problem Worse than Portugal

reply to post by GLaDOS

What does liquidating mean?

Getting rid of. If they don't think it's certain the US govt could repay the money they have effectively leant them by buying treasuries (wiki link) they might decide to sell them off. Which does nothing for confidence in the US economy or the dollar, incidentally. But above all it could instigate a cycle of ever fewer investors being willing to buy treasuries - and in the worst case scenario you're looking at Portugal, Italy, Greece or Spain as the model for what could happen.

Originally posted by SLAYER69
I dunno


I was reading a thread here early that was exposing the fact that China may have been cooking their books.
I'll try to find it.

ETA: Read all about it...

China's Debt Problem Worse than Portugal

edit on 15-9-2011 by SLAYER69 because: (no reason given)

They're cooking their GDP for damn sure.

Everybody should have seen this coming years ago, I for one did but that means nothing here.
Shipping jobs overseas, and the big retailers selling only "Made in China" who could not see this happening?
It was expected to happen and now it is.......China owns the USA now and it is the corporate bosses to blame for all this crap.
They should be all hung and quartered .....IMO.
Regards, Iwinder

What a story like this tells me more than anything is that China is, for anyone in Washington who missed it, 100% OFF the market for buying future U.S. Debt. Japan was also in the top few nations buying our debt and for obvious reasons they are off the market, probably very long term.

So....next time the U.S. Government wants to pull money out of thin air by printing up some more debt...Who is there left to buy it at the levels and sheer scale the U.S. requires at this point? We can monetize our own debt....and we have been, but that is the ultimate game of robbing Peter to pay Paul and has a real time limit, I fear. We've lost Daddy Warbucks in Beijing if nothing else. One more piece of the puzzle shaping up in the world.

reply to post by SLAYER69


Good point. I also posted an article yesterday containing this:

Zhu Min, the IMF's deputy managing director... said China too has a serious problem, with credit running at 200pc of GDP.

(taken from IMF calls for nationalisation of banks)

Nevertheless they do have enormous holdings of foreign currency and government bonds, etc., giving them an awful lot of leverage.

reply to post by Wrabbit2000


True but there are a few ways of looking at it.
If they do liquidate they lose their growing influence on US policies. There was talk of an initiative to buy back all our debt from Chinas holding first by making it a priority a while back. I never followed up and heard where that was headed, if anywhere.

PART ONE

remember this:

"Fake gold bars in Bank of England and Fort Knox

World Monday,
January 11th, 2010

It’s one thing to counterfeit a twenty or hundred dollar bill. The amount of financial damage is usually limited to a specific region and only affects dozens of people and thousands of dollars. Secret Service agents quickly notify the banks on how to recognize these phony bills and retail outlets usually have procedures in place (such as special pens to test the paper) to stop their proliferation.
But what about gold? This is the most sacred of all commodities because it is thought to be the most trusted, reliable and valuable means of saving wealth.
A recent discovery — in October of 2009 — has been suppressed by the main stream media but has been circulating among the “big money” brokers and financial kingpins and is just now being revealed to the public. It involves the gold in Fort Knox — the US Treasury gold — that is the equity of our national wealth. In short, millions (with an “m”) of gold bars are fake!
Who did this? Apparently our own government.
Background
In October of 2009 the Chinese received a shipment of gold bars. Gold is regularly exchanges between countries to pay debts and to settle"

PART TWO

if anyone remembers,,

EDIT : THIS SHOULD BE THE MAIN TOPIC ON ATS... THIS IS HUGE NEWS.

Well this shall be fun, since China has more than a trillion in US treasuries.

And they have 3.3 trillion in currency...

With that, they can buy pretty much everything.

Here's what China can buy with $3-trn forex

3)Instead of buying up debt, China can buy equity. Meaning, instead of putting most of its reserves into US government securities, China could instead go on a shopping spree in the corporate world.

It can gobble up Apple, Microsoft, IBM and Google for less than $1 trillion. By buying all the major corporations, it can dictate terms and prices to the world.

5)Rich love buying property, and nobody is richer than China -- at least in terms of the foreign exchange reserves it sits on. . so it can acquire hot property.

China can buy all of Manhattan, calculated The Economist. The island's taxable real estate is worth only $287 billion, according to the New York City government.

The properties of Washington, DC, are valued at just $232 billion. China can go from being America's banker to its landlord, The Economist said.

6)Three trillion dollars would buy about 88 per cent of 2011's global oil supply, says The Economist.

China can buy up all the oil, raise the prices and enjoy the profits.


7)It would take only $1.87 trillion (at 2009 prices) to buy all of the farmland (and farm buildings) in the United States.

If China acquires all the agriculture farms and farm buildings, it can easily control the world's food prices, as America is the biggest exporter of food products, according to The Economist

8)China could theoretically buy America's entire Department of Defence, which has assets worth only $1.9 trillion, according to its 2010 balance sheet, says The Economist.

Most of this amount would actually be able to buy all the land, buildings and investments made by the US Department of Defence. The entire armament -- guns, tanks and other military apapratus -- is valued at $413.7 billion, says The Economist.

But eh... Don't worry.

And as long as the US, and the world, will continue to buy Chinese products, China is gonna make money money, giving them more power to buy big corporations.


And even if you say that ``laws will stop China from buying everything``... well guess what, they can create front companies to do it... or give money clandestinely to their people, send them over to the US, acting as regular people, and buy everything... it might take ten years, twenty years, doesn't matter.

Prepare to bend over.

reply to post by Vitchilo


So if China owns all of the Shares or at least a Controlling Interest
in Wal-Mart for instance,,,,,

just what might be the detrimental effects, that you are ,
alluding too, ie,, bend over.
there's a difference?

They,, the workers,
instead of the Upper Class Bourguoise,,

might even get a raise,,,,,the Workers i mean,,
after all they are they are the,, WORKERS COMMUNIST PARTY
of China.
right?

that is who owns the purse strings of China,, or is it the Military,,
i always forget.

reply to post by BobAthome


Communism does not raise the standard of living for the workers. It lowers the standard of living for everyone else till it reaches the level of the workers.


(China only has this clout because it has adopted the capitalist model. Which means it's dog eat dog, same as it ever was in the West.)

reply to post by BobAthome


Well the money they make end up in China... to get China more powerful... while America has less and less money...

Anyway this kind of news is what world wars are made of.

Saw a similar thing about china in a documentary about fish. The fisheries officials were falsifying fish numbers hugely exagurating catch numbers, to insure more government funding. This overstated huge number of fish caught, lead to a worldwide crisis because the world thought that there were far more fish in the seas to be caught than there actually were. As a result the waters worldwide have been overfished dramatically past what would have been, had the world governments had the true numbers of fish caught from china and realising that there are far less fish in the oceans than thought.

China as a whole wasn't to blame, but members of their fisheries dept were. No doubt this was a huge blow to oceanic health and balance world wide. You're talking big numbers with China eh.

reply to post by Vitchilo

THIS SHOULD BE THE MAIN TOPIC ON ATS... THIS IS HUGE NEWS.

Here's how one commentator put it:

This is a humongous announcement that is not widely reported. If China is no longer buying US treasuries and actively selling its holdings, who is going to take the slack? The US government is running deficits in the region of US$1.4-1.8T. It is obvious: the FedRes will execute QE to infinity!
-
If the FedRes does not buy all the treasuries which the US government issues and those that China sells, interest rates will rise and we will be facing a bond market Armageddon. No country wants to stick around when China sells, they will try their best to sell and get out first! QE to infinity means the USD is toast ! Got physical gold yet?

Source
The news is largely only out in the blogosphere. I wonder how the MSM will spin it?

reply to post by pause4thought


Isn't that the whole idea of owning US bonds, buy out the debt, allowing US invest in China cheap labor, to eventually come back and buy America one piece at a time, with all that liquidity they can buy the whole US government.

China, the once third world country to the rescue to save the mighty America but no without consequences.

Sad. The greed of America Capitalism is will be Chinas big pay off.

reply to post by pot8er






'The fisheries officials were falsifying fish numbers hugely exagurating catch numbers, to insure more government funding."
'
'The Old Days:
"The fisheries officials were falsifying fish numbers hugely exagurating catch numbers, to insure,
they didn't get shot"

This is what we were taught,

But guess we were wrong,
Seems money is stronger than the bullet?
or does no job pretty much mean the same thing everywhere?
take the money or a bullet?

same ole..same ole.

reply to post by marg6043


Powerful words! It almost sounds like one of those turning points in history, doesn't it? Like the sudden end of communism.

Noone has picked up on this telling little phrase yet:

The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt

.
We've been saying that in here for years. (While the MSM spoke of QE as an eminently sensible macroeconomic policy.)