The largest foreign holder of the U.S. dollar has called on other countries to stop enabling United States debt-spending.
“The world’s two largest foreign holders of U.S. treasuries, Japan and China, continued to pare down their holdings of U.S. debt in December, data from the U.S. Treasury Department showed on Wednesday. Foreign holdings of U.S. treasuries declined in 2022. Japan’s holdings also dropped by $224.5 billion specifically, while China’s holdings were down by $173.2 billion to $867.1 billion, the lowest since May 2010.
For a long time, changes in China’s holdings of U.S. debt have been a topic of great concern, which is seen by some as a measure of the state of China-U.S. relations. Yet, there is no need to complicate China-U.S. relations with China’s reduced holdings of U.S. treasuries. The reasons behind China’s recent reduction of its holdings of U.S. debt are mainly economic considerations, as the problems in the U.S. economy and the changes in bilateral economic and trade relations have increased the need for China to pursue diversification of its foreign exchange reserves.
To be clear, while China has reduced its holdings of U.S. debt, it doesn’t change the fact that U.S. treasuries remain an important part of China’s foreign exchange reserves. China is still the world’s second-largest non-U.S. holder of U.S. treasuries, because the U.S. dollar remains the world’s most important currency for trade settlement and a safe-haven for investors seeking security amid the changeable markets. Besides, U.S. sovereign debt has the highest and the most stable credit rating.
But nowadays these factors are changing". -Global Times
Although Japan holds more U.S. treasuries than China, China’s total dollar holdings are nearly four times greater than Japan’s.
China looks to be doing to the U.S. economy what the International Monetary Fund does to third-world governments. The IMF encourages countries to enter into debt in order to seize their national assets.
China has effectively made the U.S. economy dependent upon the Chinese willingness to subsidize it, which is why the United States can’t afford to financially sanction the Chinese in the way it has the Russians.