China Hands Over Biggest U.S. Creditor Crown to Japan

Economy - Pavan Pandey - Dec 17,2016

Rating -

stars - based on 21 reviews

china hands over biggest us creditor crown to japan

China has been dethroned by Japan as the biggest debt holder of the U.S. govt. as the Chinese central bank has plunged into its foreign exchange reserves to support the currency, Yuan.

Recently, China has lost its crown as United States of America’s biggest foreign creditor; this tag is now enjoyed by Japan. 
Beijing has been dumping U.S. governmental debt to prop up its currency Yuan. According to the U.S. Treasuries department calculation, Japan held $1.13 trillion of U.S. debt at end of October. China’s enormous holdings of United States liability chopped down to $1.12 trillion at the end of October and their lowest level in more than six years.

Both nations unloaded Treasuries during the month of October, but China dumped far more: its assets plunged by $41.3 billion, while Japan’s holdings fell by just $4.5 billion. As this result, the world’s second-largest economy, China, has ceded the crown of being the top holder of U.S. Treasury debt to Japan. On Friday, the People’s Bank of China fixed the midpoint rate of Yuan at the very lowest level in the past eight and a half years.

Over this latest Chinese move, U.S. President-elect Donald Trump attacked Beijing over its business and currency policies, also his questioning of the stance of present and previous U.S. administrations concerning small nation Taiwan has generated fears that China could agree to sell United States Treasuries in reaction. The Chinese currency, Yuan is now down more than 7 percent against the US dollar this year. 

The released data are the up-to-date indication of economic burdens building in China, following a debt-fueled investment growth in the year after the financial disaster. The Federal Reserve’s interest-level rise on Wednesday extended a worldwide dollar rally, pushing the Chinese Yuan to the lowest level in 8 years. 
According to a Chief economist at RBC Global Asset Management, Mr. Eric Lascelles, “To the extent the dollar continues to rise, I suspect this reflexive selling will remain the dominant driver of Chinese Treasury holdings.’’