China to reduce US Treasuries by $4.4 billion: or financial institutions

China's first reduction of U.S. Treasuries in the past 10 months has caused widespread concern in the market. China holds $763.5 billion trillion of US Treasuries by April 30, down from $4.4 billion trillion over $767.9 billion trillion at the end of March, according to statistics on international capital Flows (TIC) released June 15 by the U.S. Treasury Department's local time. (See the morning paper yesterday, A27 version of the report) this is after China last June, the reduction of 3 billion U.S. Treasury bonds after the first reduction, after the February 2008 China also reduced 5.7 billion U.S. dollars.　　So this is the third time since the beginning of the 2008 reduction. In China's huge foreign-exchange reserves, a mere 4.4 billion dollars is drop, but as the country currently holding most of US Treasuries, the move by China still causes widespread concern in the market: Why did China choose to reduce its holdings at this time?　　As America's biggest creditor, will China open the door to reducing its debt to the United States as the "go-to-dollar" outcry?　　Why should we reduce the fund's debt issuance?　　There is a view that China at this time to reduce U.S. Treasury bonds, is intended to cash in. The international financial community has argued that BRIC will be a big buyer of the first of the International Monetary Fund's bonds – China has said will buy 50 billion of dollars in IMF bonds, Russia and Brazil are prepared to buy 10 billion of dollars of bonds, to improve the voice of the international financial system.　　It is noteworthy that Russia, Brazil, Switzerland, Germany, Japan and oil exporters and other countries, in April, the U.S. government debt also carried out a different degree of reduction. But Zhang, deputy dean of the China-Europe Lujiazui Institute for International Finance, argues that (reducing short-term US Treasuries) may be a low yield on short-term bonds, an active adjustment in the investment structure.　　He does not agree with the notion that central banks are short of money.　　Zhang speculated that the reduction of funds may be used to invest in raw materials, commodities.　　Who in the reduction is not active reduction but the market has another view. According to Xinhua, Reuters analyst Bi Xiaowen that from China's April net gain of 10.327 billion U.S. dollars in long-term Treasury bonds, the reduction is only to reduce short-term treasury bonds, or some of the natural maturity of the U.S. Treasury bonds, "is not a big, initiative to reduce the U.S. dollar and the U.S. Treasury market has limited impact." Bi Xiaowen pointed out that since the financial crisis, China's foreign trade exports face the most severe period since the accession to the WTO.　　The trade surplus and the rapid decline in foreign direct investment capital inflows into China have weakened since last year, in which case the central bank's grip on the cash flow of the dollar has also strained, and more selective and proactive in the choice of US Treasuries, in particular, the net reduction of US Treasuries held in April.　　The Chinese central Bank is the main body of the reduction, the market has not reached a consensus. "Reduction is not necessarily an official act, but also may be the organization in the reduction." Compared with the current more than 700 billion dollar U.S. Treasury bonds, more than 4 billion dollars is only a small number, canTo be regarded as normal fluctuations.　　Tan Yaling, executive director of the China Institute of International Economic Relations and financial expert, said TIC data includes, among other things, the number of US Treasuries held by Chinese financial institutions. The same view is also the CCB senior researcher Zhao. According to the central bank's April credit data, he said, foreign exchange loans increased by $7 billion a month, up 4.9 billion dollars over a year earlier, while foreign-exchange deposits increased by $3.9 billion trillion, a little more than 5.1 billion dollars a year earlier.　　There is a clear gap between loans and deposits, which is likely to be the cash that financial institutions will hold in the Treasury, which has underpinned lending growth.　　The fact is that since the Fed adopted quantitative easing, the market has generally expected the dollar to depreciate in the medium to long term, and long-term investors in the market have adjusted their portfolios.　　Reduce the trend to open the door to reduce U.S. debt?　　The next question is whether China will continue to slash its holdings of U.S. Treasuries. "At present, China is still the largest holder of U.S. Treasury bonds outside the United States, the reduction of only 4.4 billion U.S. Treasury bonds will not affect the future trend of our further increase in US Treasuries."　　Zhaoquanho, director of financial research at Treasury Finance Department, gave his answer.　　According to TIC data, China has increased its holdings of $165.9 billion trillion in U.S. Treasuries from the end of March 2008 to the end of March 2009.　　Song, a Treasury trader at the Chicago Board of Trade, also agreed that the 4.4 billion reduction should be just a burst of action, not long-term, in the long run, China should at least not be too much to reduce the U.S. Treasury debt, because this is still a more prudent means of hedging. Zhang asked: "Reduce the buy what?" "In Zhang's view, China is unlikely to significantly reduce its holdings of US Treasuries at this stage." The first is the direction of investment, which is trustworthy? Another assumption is that throwing dollars into raw materials, once the dollar falls, could lead to imported inflation like the 2007, and will also lead to China's export difficulties, "the ultimate solution may be to reduce the surplus, let the renminbi appreciate or internationalize the renminbi." Yang, director of the Financial Information Center of Renmin University of China, also said that there was no possibility of a massive sell-off of US Treasuries: "Why?" Because there is no one to the world. Who's going to buy this big plate? There's a price problem here. But Zhang Bin, deputy director of the international Financial Room of the Institute of Social Sciences, said, "from the standpoint of self-interest, China will choose the right time and means to adjust the structure of foreign exchange reserve assets." "Reducing US Treasuries is a reduction in foreign debt to the US, which is beneficial to the US economy in the medium to long term, reducing the external dependence of the United States and the imbalance in the domestic economy."　　Zhang Bin said.　　The next step is to argue about adjusting the structure, but there is little doubt that China should adjust its foreign-exchange reserves in the long run. The chief researcher of the People's Bank of China's Institute of Finance, Zouping, said that a country's foreign exchange reserves are not as good as possible, and that a reserve system should be set up with the goal of balance-of-payments; under the paper currency standard system, excessive foreign exchange reserves are facing the risk of devaluation of reserve currency, and the foreign exchange reserves should have systematic risk management system and should follow the principle of risk decentralization. Zhang bin said that from a risk-averse perspective, China should adopt a more flexible attitude towards holding US Treasuries.　　But how flexible it is depends not only on willingness, but also on the design of the management system of foreign exchange reserves and the changes in financial and real economic situations at home and abroad. He said that under a given reserve asset scale, it could reduce the losses caused by the depreciation of the dollar by buying some strategic reserves, investing in energy countries, mining countries, buying stakes in some U.S. financial institutions, and corporate bonds, "at the same time, if China can transform itself through its domestic economic structure, Reducing the accumulation of trade surpluses and the overall size of foreign exchange reserves will be of greater help to national welfare promotion. "China holds changes in US government debt monthly change April 2009 763.5 billion USD-4.4 billion USD March 2009 767.9 billion USD + 23.7 billion USD February 2009 744.2 billion USD + 4.6 billion USD January 2009 739.6 billion USD + 12.2 billion USD 2008 year December USD 727.4 billion + 14.2 billion USD November 2008 713.2 billion USD + 29 billion USD October 2008 684.2 billion USD + 65.9 billion USD September 2008 618.3 billion USD + 44.6 billion USD August 2008 573.7 billion USD + 23.7 billion USD July 2008 $550 billion USD + 15 billion USD June 2008 535 billion USD-3 billion dollar total change in the last five countries in April at the end of last month China-4.4 billion USD 763.5 billion USD japan-800 million US $685.9 billion USD Caribbean-8.9 billion USD 204.7 billion USD oil exporter-25 billion USD 189.6 billion UK + 24.6 billion US $152.8 billion USD April Bric national debt amount change country total month change China 763.5 billion dollar-4.4 billion U.S. dollars Russia 137 billion dollar-1.4 billion dollar Brazil 126 billion dollar-600 million dollar India 38.5 billion USD + 300 million USD ( Data Source: US Treasury