As I understand it, other countries' "belief in our debt" has little to do with their treasury holding levels. All countries that net export products to the US tend to end up owning T-bills proportionate to their export surplus. This is because their banks end up with a bunch of US-Dollar-denominated cash from exchanges by the exporting companies, and getting a return of even 1.5% (our 2-year interest rate) is better than 0% on cash.<p>The treasury level rising and falling is not usually intentional or by itself sinister, merely a byproduct of a fluctuating export surplus.<p>This article has a nice illustration of the process:<p><a href="https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/" rel="nofollow">https://www.theatlantic.com/business/archive/2011/03/infogra...</a><p><a href="https://www.theatlantic.com/business/archive/2011/03/infographic-how-china-manipulates-its-currency/73201/" rel="nofollow">https://www.theatlantic.com/business/archive/2011/03/infogra...</a>
Near as I can tell, and I’ve checked on this infrequently over the past few years, Japan’s holding of US debt have always been within spitting distance of China’s, where spitting distance is a few hundred billion give or take. So the news in itself isn’t surprising.<p>That is to say, I think it would be a mistake to read much into this. The largest share of Federal debt is held domestically, really the lion’s share. China and Japan are generally within the trillion dollar range, and are always #1 and #2 foreign holders of US debt.
I believe the real reason why China is no longer the largest holder is that, China SPENDS tons of dollars she earns/holds on one-belt-one-road projects. US and western countries are super unhappy about that, as China effectively de-weaponize dollars. China is supposed to earn/hold US paper money and never to spend it. Just my 2cents.
Most U.S Treasuries are held by American citizens, it's why fiscal hawks are always ranting that defecit spending "bankrupts our kids", foreign holdings are insignificant in the grand scheme, and as noted the largest holders are all allies.
I am not familiar with Treasuries, I'd appreciate some insight into what this means "China has been a less aggressive buyer of the U.S. sovereign debt". How is it possible to "hold" (buy) another country's debt?
They are small players compared to the Social Security Trust Fund and the Federal Reserve Quantitative Easement holdings. Both of those total six times Japan or China.
China seems to be having a huge capital flight. It has just removed the peg on their currency price, what is a large giveaway.
It's perfectly natural that foreign currency reserves stop increasing or even decrease.