US says, China's debt holdings are not a threat
China's holds more than $1.3-T in US debt and the prospect that it might suddenly withdraw funds do not pose a national security threat, according to a new Pentagon assessment.
"China has few attractive options for investing the bulk of its large foreign exchange holdings out of US Treasury securities," given their extent, according to the report.
China is the 2nd-largest holder of US government debt after the US Federal Reserve.
Acting at the direction of Congress, the Defense Department studied the rationale behind the investments and whether "the aggressive option of a large sell-off" would give China leverage in a political or military crisis.
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China's debt holdings have been cited as a sign of US vulnerability in this year's election campaign.
Chinese commentators have occasionally suggested using the debt holdings to pressure the US on its pro-Taiwan policies.
However, if actually did move to sell significant quantities of US Treasuries they would erode the value of their own sovereign wealth funds as bond yields and interest rates rose, and therefore would run the risk of destroying the world economy upon which they and the US are so dependent.
Sometime in the distant future that might not be the case if China is able to develop its own internal markets, but it is for the foreseeable future the US appears to be secure.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.