Declining Chinese investment in US Treasury holdings

China continues to pare its holdings of US Treasuries, leading to market speculations over its motives. The country's stockpile of US government debt hit the lowest level in 14 years at the end of August 2023, with the pace of decline accelerating.

Some analysts said Chinese monetary authorities are leading the move to shore up the yuan, while others blame it for a recent bond rout in the United States.

"Maybe China is behind the rise in US long rates," said Apollo Global Management economist Torsten Slok in a blog posted in early October, when yields on long-term US bonds reached a 16-year high.

China's Treasury holdings started falling steadily after peaking in 2013.

The balance of US Treasurys held by China totaled US$805.4 billion in August, down 40% from a decade earlier, according to data from the US Treasury Department.

China once actively bought the securities with its ample foreign exchange reserves, becoming the second-biggest foreign investor in US Treasuries after Japan. Given the size of its holdings, China's selling could roil US bond prices, pushing up interest rates.

Not everyone, however, agrees with Slok's views, contending that China could just as easily move its holdings to overseas custodians without selling them. Yet many analysts focus on the decline in the country's Treasury balance as a sign of Beijing's strong determination to defend its own currency.

China is facing serious capital flight caused by rising concern about its economic growth and debt burden. In September, capital outflows reached US$75 billion, the biggest such monthly amount since 2016, according to an estimate by Goldman Sachs. This exerts strong downward pressure on the yuan, which now trades at around 7.3 against the dollar, the lowest since 2007.

"China's state-run banks likely dumped the dollar around October 01, National Day," said a currency trader at a foreign bank, echoing the views of his peers. It appears that Chinese authorities urged state-run banks to shore up the yuan against dollars and they responded by selling Treasuries to raise needed funds.

Beijing has spent hundreds of billions of dollars out of its foreign exchange reserves on market interventions since 2015, when its devaluation of the yuan led to declines both in stock and currency prices.

Eager to maintain the current level of foreign reserve balances, Beijing may have pushed state-owned lenders to support the yuan on its behalf, according to analysts.

The yuan's daily reference rates announced by the People's Bank of China show the sense of crisis being felt by authorities. While the gap between the reference rate and the market value has widened to a record level, the official midpoint remains pegged at 7.17 to the dollar since mid-September. As China allows the yuan to fluctuate only within 2% on either side of the midpoint, it looks as if the country has reverted to a fixed-rate system.

Taking advantage of the country's lower interest rates spurred by monetary easing, some speculators engage in carry trade by borrowing in yuan and converting the money into currencies with higher interest rates. Goldman Sachs has proposed clients use borrowed yuan to fund bets on higher-yielding currencies like the Brazilian real and other South American money.

As speculators seek profits by selling the yuan to buy other currencies, an increase in carry trade could further weaken the Chinese currency. Many analysts expect that if such speculative trading increases, Chinese authorities will have no choice but to step in to bolster the yuan -- possibly by unloading Treasuries.

However, the country's foreign currency reserves -- the source of Treasury purchases -- are unlikely to increase as in the past as export growth slows and the amount of foreign investment declines. Efforts by Western countries to de-risk economic ties with China have only begun to take effect.

If China continues to trim its Treasury holdings, market players may see it as a factor pushing up bond yields and thus as a matter of concern for the US Federal Reserve. The unsteady Chinese economy has added yet another unpredictable variable to global financial markets.

 

Who is responsible for killing of one million US citizens? COVID or Administration

According to a report by The Hill, deaths from COVID-19 have reached one million in the United States. The source of this data is none other than the Centers for Disease Control and Prevention. 

The US has had more deaths per capita than Western Europe or Canada. While new deaths have fallen, the total death count is still rising.

It is also expected that the United States, like other countries, has under counted the true number of deaths from the coronavirus.

Illustrating how high one million deaths originally seemed, then-President Donald Trump said in March 2020 that holding the country to between 100,000 and 200,000 deaths would mean “we all, together, have done a very good job.” 

Deaths have continued stacking up even into 2021 and 2022, after vaccines became widely available, disproportionately among people who did not get vaccinated or did not get booster shots.  

An analysis from the Peterson Center on Healthcare and the Kaiser Family Foundation found that about 234,000 US COVID-19 deaths, or roughly one quarter of the total, could have been prevented if people had been vaccinated. 

The share is even higher, at 60%, of deaths since vaccines became widely available in June 2021.  

“Since vaccines became widely available last summer, a total of 389,000 adults in the United States have died of COVID-19, and 6 in 10 of those deaths — about 234,000 deaths — could have been prevented by timely vaccinations,” the researchers found. “This analysis underscores the importance of continued efforts to increase the number of people vaccinated and boosted against COVID-19.” 

Globally, the World Health Organization recently reported that the total number of deaths is more than twice the number officially reported, once indirect deaths due to factors like health care systems being overwhelmed are taken into account. That wider total is almost 15 million deaths worldwide.  

While vaccines and booster shots continue to provide important protection against severe disease, new variants of the virus have thrown curveballs that have meant cases continue to spread, though they are much less dangerous among vaccinated and boosted people.  

There are still more than 300 people dying every day from the virus in the US on average, according to a New York Times tracker, though that is one of the lowest levels since the pandemic began. In addition to vaccinations, a new treatment pill from Pfizer known as Paxlovid has helped to take some of the teeth out of the virus.  

The White House is preparing for another wave of the virus in the fall and winter, which could infect as many as 100 million Americans, a senior administration official said earlier this month.  

The administration argues the country now has the tools to make such a wave much more manageable, and that the number of cases could be lower if Congress provides the funding necessary to purchase updated vaccines, more tests, and additional treatments. Without those tools, the virus could take a much more significant toll in a coming wave.  

As much of the country looks to move past the virus, though, funding is stalled in Congress. Republicans have opposed new funding unless it can be paid for with cuts elsewhere, and the parties have sparred over how to pay for it. The GOP has also demanded a vote to overturn the Biden administration’s move to lift a Trump-era pandemic border policy known as Title 42.  

White House COVID-19 response coordinator Ashish Jha on Twitter pointed to a hopeful trend, that even as cases have risen recently in the Northeast, deaths have stayed largely flat, which he attributed to high booster rates in those states and the effectiveness of new treatments. 

But he said funding is needed to ensure supplies of treatments and updated vaccines are available.  

“We’re at a point in the pandemic where we know how to manage the virus,” he wrote.