When China Turns Away

It may already be happening.

Recently released US Treasury data shows China has been actively reducing its holdings of Treasury debt. China has cut its holdings by $100 billion over the past year to just $844 billion. China has been seeking new ways to recycle its trade surplus and hold back any rise in the yuan.

“Diversification should be the basic principle,” said Yu Yongding, ex-adviser to the Chinese central bank. China has been buying record amounts of Japanese, Korean, Thai, and Latin American bonds to replace its U.S. debt holdings.[1]

China may not be done dumping U.S. Treasuries:

Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that “end of QE” again?[2]

Where will the U.S. Dollar and the American economy be if they walk away completely?

It may have been in the cards for quite some time:

Sources:
[1] China Reducing Holdings Of U.S. Treasury Debt
[2] China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings