The US Treasury said Tuesday 15th August that China had made in June, its most important purchases of US debt securities for six years. Beijing becomes the first US creditor.
More than 19 800 billion dollars! It’s mind-boggling amount of US government debt in June. An amount that attracts the desires of many foreign investors, and primarily of the Chinese state.
A Tuesday, August 15 by the US Treasury released report shows that Beijing has accelerated its purchases of US bonds (debt securities) in June and now owns nearly 1147 billion of US debt. China delights as well in Japan as first creditor country.
Why China Does buys the dollar?
The Beijing renewed appeal for the dollar is due to the depreciation of the greenback. Since the beginning of the year, the US currency loses its value and risk more influence down its Chinese competitor, the yuan.
In 2016, the PRC had to draw nearly 320 billion dollars (273 billion euros) in foreign exchange reserves to curb the depreciation of its currency against the dollar.
On the currency market, the yuan and the dollar are indeed closely related. Resale of US securities, denominated in dollars against the yuan makes it possible to push up the Chinese currency, and to respect the fixed link between the two currencies.
Since the beginning of the year, and the depreciation of the dollar allows China to regain vis-à-vis flexibility of its monetary policy and to replenish its foreign exchange reserves. In July, these have registered their highest level in nine months in 3081 billion, nearly 2600 billion.
Who holds US debt?
At one time high, the US debt will not, however, solely for the Middle Kingdom. Part of it is simply not on the market of bonds, because they are funds of the US Social Security. Funds that are still more than 5400 billion.
Moreover, 6171 billion of US debt is held by foreign creditors. After China, the Japan holds the largest amount of US debt, with 1091 billion in June.
Third, Ireland has 302.5 billion in US bonds. France, she arrives in 18th position, with in his possession 72.3 billion in US loans.