China Will Keep Buying Our Debt
Because it’s the best of the worst…and it’s all bad right now.
China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its â€œonly optionâ€ in a perilous world, a senior Chinese banking regulator said on Wednesday.
China has used the dollars it accumulates selling manufactured goods to US consumers to accumulate the worldâ€™s largest holding of Treasuries.
However, the increasing US budget deficit and its potential impact on the dollar have raised questions about the future Chinese appetite for US debt.
Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.
And here are the key statements…
â€œExcept for US Treasuries, what can you hold?â€ he asked. â€œGold? You donâ€™t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.â€
Mr Luo, whose English tends toward the colloquial, added: â€œWe hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn]?.?.?.we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.â€
Lucky for us?