China holds U.S. Treasury bonds? I don t really understand

In layman's terms, the United States borrowed our Chinese money and needed an IOU, which is the U.S. Treasury bonds.

The amount of foreign government bonds held can represent a country's economic strength to a certain extent.

By the way, China will have to continue to hold US Treasury bonds, and if the US devalues the dollar, the national debt will also shrink significantly. That is, the value of China's holdings of US Treasury bonds will also be significantly reduced.

Treasury bonds are bonds issued by a country that are guaranteed by the state.

The operation of the state apparatus requires a large amount of money, and these money mainly come from taxes, how much tax to collect, what kind of taxes to collect, all need to be prescribed by law, the executive power and the legislative power of the parliament need to be gamed, not what you want to collect;

If a country's tax revenue is not enough to support the operation of the state apparatus, that is, if there is a shortage of money, you can borrow money from others like an individual, issue treasury bonds, and the purchaser can be an individual, an organization, a state, etc., and the treasury bonds have a term, and they must be paid when they are due, and there is interest;

U.S. Treasury bonds are money borrowed by the United States, and China's holding means that China has purchased Treasury bonds issued by the United States, and it can also be said that China has an American IOU in its hand, and we are the creditors, and the United States is in debt.

It has nothing to do with debt. We have obtained a huge amount of dollars through a large number of foreign trade activities with the United States, mainly exports, and the dollars cannot be used in our own country and there is no good investment channel, so we can only buy US dollar treasury bonds issued by the United States ** and obtain meager interest. U.S. debt and interest payments at maturity.

On the contrary! If China sells, the United States will suffer!

Treasury bonds, that is, bonds issued by **, such as face value 100, but only 85 when issued, after buying, you can get 100 with bonds in ten years. In fact, it is an IOU for the state to borrow money, which is very secure.

It's the money that the Americans didn't pay for the goods that China exported to the United States.

China holds more than a trillion dollars in U.S. Treasury bonds.

By 2023, China's total holdings of U.S. Treasury bonds will exceed one trillion dollars, nearly $1 trillion more than in 2018. According to data released by the U.S. Treasury Department on May 24, China's total holdings of U.S. Treasury bonds amounted to $100 million as of March 31, 2020, up from 2019. On the other hand, according to the Ministry of Finance, China's holdings of US Treasury bonds will continue to increase in the coming years.

By 2023, China's holdings of U.S. Treasury bonds will reach $100 million, nearly $1 trillion more than in 2018.

Reasons for China's purchase of US Treasury bonds:

China wants to be able to use U.S. Treasuries to protect against capital flows in international markets. On the one hand, U.S. Treasury bonds are the most trusted national bonds by investors, with good liquidity and can maintain investment stability in the long run. On the other hand, China has purchased U.S. Treasury bonds to avoid the impact of exchange rate exercises and the continuous loss of foreign exchange reserves.

As a result, China is very cautious in investing in U.S. Treasury bonds to ensure the safety of its capital.

Risks of China's Holding of U.S. Treasuries:

1. If inflation occurs in the United States, then the yield of China's holdings of US Treasury bonds will be greatly reduced, because there is a positive proportional relationship between the yield of US Treasury bonds and inflation.

2. China's holdings of U.S. Treasury bonds are greatly affected by fluctuations in foreign exchange rates, because the value of the U.S. dollar relative to the Chinese yuan is constantly changing, and once the U.S. dollar depreciates, the income from the U.S. Treasury bonds invested in will be greatly reduced. <>

At present, China holds trillions of dollars in US Treasury bonds, China is the largest creditor of the United States, the second largest creditor of the United States is Japan, which holds trillions of US dollars, and China and Japan hold more than one-third of the total US Treasury bonds held by major foreign creditors.

According to data released by the U.S. Treasury Department, China's holdings of U.S. Treasury bonds fell to one trillion dollars as of 2020. China's holdings of U.S. debt fell by $9.3 billion, making it the country with the largest decline in U.S. debt, but China remains the second largest creditor of the United States. As of now, the debt of the United States is trillions of dollars, and the ratio of GDP to GDP is very close, which is very close to the internationally recognized warning line of 120%.

In order to stabilize the exchange rate and protect exports: China and the United States have a large surplus.

The state wants to stabilize its national currency against the US dollar.

The exchange rate of the caverns should not appreciate the renminbi, so as to protect the country's export industry. For the investment preservation of US dollar assets: China has accumulated a large amount of foreign exchange for a long time, and these US dollar assets also need to be invested in value preservation, because of US Treasury bonds.

Good credit and a large number of U.S. Treasury bonds can allow China's foreign exchange reserves.

Preservation or even appreciation.

Extended Materials. National Debt (National Debt; Government loan, also known as state public debt, is a creditor-debtor relationship formed by the state on the basis of its credit and in accordance with the general principle of debt by raising funds from the society.

Treasury bonds are bonds issued by the state and are ****.

A type of ** bond issued to raise financial funds.

It is a creditor's right and debt certificate issued to investors, promising to pay interest and repay the principal at maturity in a certain period, because the issuer of treasury bonds is the state, so it has the highest credit and is recognized as the safest investment tool.

China's national bonds refer exclusively to the Ministry of Finance.

On behalf of the **** issued by the national government bonds, guaranteed by the national financial credibility, the credibility is very high, has always been known as "gilt bonds", prudent investors like to invest in treasury bonds. There are three types of treasury bonds: voucher treasury bonds, bearer (physical) treasury bonds, and book-entry treasury bonds.

Treasury bonds are a special form of debt, which has the following characteristics compared with the general creditor's rights and debts:

From the point of view of the subject of legal relations.

The creditor of the treasury bond can be a citizen, legal person or other organization at home and abroad, as well as a national or regional ** and an international financial organization, while the debtor can generally only be a state.

Judging by the nature of the legal relationship.

Although the legal relationship of national debt is an equal legal relationship compared with other financial legal relations, compared with the general creditor's rights and debts, it reflects a certain subordinate nature, which is more obvious in the legal relationship of domestic debts of the state.

From the point of view of the realization of legal relations.

Treasury bonds are credit ratings.

The highest and safest creditor-debtor relationship.

From the debtor's point of view.

Treasury bonds are voluntary, compensatory, and flexible.

From the creditor's point of view.

Treasury bonds have the characteristics of safety, profitability and liquidity.

Generally speaking, the balance of fiscal revenue and expenditure can be carried out by increasing taxes, issuing additional currency, or issuing treasury bonds. Compared with the above three methods, increasing tax revenue is a practice taken from the people and for the people, although it is a good method, but there is a certain limit to increasing tax revenue, if the tax is too heavy and exceeds the ability of enterprises and individuals to bear, it will not be conducive to the development of production, and will affect future tax revenue.

Wang Ye said financial news: On February 16, it was reported that China's holdings of U.S. Treasury bonds continued to decrease.

According to international capital statistics released by the U.S. Treasury Department on February 15, China's holdings of U.S. Treasury bonds were $867 billion in December 2022, declining month-on-month for five consecutive months and hitting a new low in 12 and a half years.

Specifically, China's holdings of U.S. Treasury bonds fell by $173.2 billion in the year to the end of December last year(17). The annual ** amount is the largest in six years after 2016 (US$187.6 billion).

In addition, the data also shows that in 2022, the overall holdings of US Treasury bonds by overseas countries also decreased6, but the decline in China was more prominent.

In this regard, Nikkei Shimbun analysis commented that in addition to the impact of rising interest rates in the United States (bonds), the situation between China and the United States is also intensifying, in this case, China may be reducing the dollar assets held by blind cherry blossoms in foreign exchange reserves and accelerating the pace of "breaking away from the dollar".

Some U.S. national debt is about a trillion dollars.

As of November 2022, China currently holds about one trillion dollars in U.S. Treasury bonds, making it the largest holder of U.S. Treasury bonds in the world.

One of the most important is that China has a high surplus with many countries around the world.

If we take the import and export volume of China and the United States to each other in 2021 as an example, we can find that China's exports to the United States ($576.1 billion) are higher than imports ($149.2 billion).

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As of the end of March 2019, China's holdings of U.S. Treasury bonds were about $1 trillion, the size of which Japan holds is about one trillion dollars. By October, China's U.S. Treasury debt was $13.6 billion. China and Japan have the largest holdings of U.S. bonds held by foreign countries.

Together, the two countries exceed $2 trillion.

There is also an element of maintaining exchange rate stability in the purchase of U.S. bonds. Some experts said that the reason why the renminbi has been able to maintain such low exchange rate fluctuations against the US dollar is that it relies on China to hold a large amount of US Treasury bond reserves. In fact, China's foreign exchange is not all about buying U.S. Treasury bonds, but also buying **, euro, yen assets and so on.

China's holdings of U.S. Treasury bonds are more than 500 billion yuan, and its total foreign exchange reserves are trillions. US dollar reserves account for as much as 60% of China's total foreign exchange reserves.

Concerns about you are completely unnecessary; Many people think that China's holding of a large number of U.S. Treasury bonds is a kind of containment of the United States. By selling US Treasuries, it affects the dollar exchange rate and domestic interest rates. Conversely, this view has also been exploited politically at the international level, such as when former Mrs. Hillary Clinton used it in Democratic party elections, calling for restrictive legislation to prevent the United States from becoming a hostage to the economies of Beijing, Shanghai, or Tokyo.

She claimed that "more than 44 percent of the U.S. national debt is controlled by foreign countries, making the U.S. particularly vulnerable."

Now the world is a globalized world, and the interests of the major powers are interlinked and interdependent. all know that they hurt people by 1 inch and self-injury by 1 foot; The U.S. dollar is the world's currency, and the foreign exchange reserves of many countries are the U.S. dollar, and the U.S. is a world power, and the economy, science and technology, and talent reserves are world-class; The country's credit is the strongest in the world. His treasury bonds are also an investment product of many countries and institutions in the world; Good liquidity, just like the US dollar. If the United States does not recognize the Treasury bonds it has issued, it represents the collapse of the entire credit of the US Treasury bonds, then the US allies who hold the most US Treasury bonds, such as Japan, Middle Eastern oil countries, and Europe; If you think about whether the United States will do this, whether they will agree with the United States to do this, the United States spends Treasury bonds on borrowing, and it has to issue Treasury bonds every year, and if it denies its own Treasury credit, it means that no one will buy US Treasury bonds in the future.

If China is worried that the U.S. Treasury bonds will become waste paper, it can be sold in the market, 500 billion, any developed country, several large financial institutions, and investment ** can take over, in fact, the United States itself can buy all the treasury bonds in China's hands.

China is no longer the country it was 100 years ago, it is now the largest developing country in the world, and its economy belongs to the huge and largest consumer market in the world; No one will bully us, because everyone knows that no matter what we do, it is for the sake of profit, and if we fight, both sides will lose, so it is better to show our wisdom at the negotiating table.

According to the U.S. Treasury Department, China held trillions of U.S. Treasury bonds in December 2014, down from $1 trillion the previous month. At the end of December 2014, major foreign creditors held about $1 trillion in U.S. Treasuries, up from about $1 trillion at the end of November. (ENDS).