China’s Grip on the United States is Slipping?

Recently, I glanced across a Bloomberg article that discussed how China, who is currently the largest holder of US Treasury bonds and one of the main creditors to the U.S. public debt, has started to reduce their holding of US Government securities for the first time in recent years.

In the article they stated that:

“The world’s second-largest economy held $1.15 trillion Treasuries as of Dec. 31, down from $1.16 trillion at the end of 2010, according to Treasury data released yesterday. The U.S. revised the figures to show that China held about $51 billion more than reported earlier last month. The revision shows nation’s holdings peaked at $1.3149 trillion in July.”

It seems that the Chinese government is starting to change is policy views towards where to invest their interests in other countries and not just the United States. As the Article China’s Holdings of Treasuries Decline for First Time “China’s policy makers have advocated diversification of the nation’s foreign-exchange reserves away from U.S. assets after more than doubling its holdings of Treasuries since 2007 in the wake of the global financial crisis.”  However, one reason I believe that the Chinese are trying to diversify their investment in our nation’s foreign exchange reserves is that the interest in the US government treasury bonds are starting to go down in terms of yield return.

As the article states that the Yields are going down as a result of the European Debt Crisis:

Yields on benchmark 10-year Treasury notes dropped to a record low of 1.67 percent in September as investors sought a haven from Europe’s sovereign - debt crisis and the Federal Reserve pledged to keep borrowing costs close to zero to sustain economic growth.

So is it that the beginning of the end in terms of reigning in the American public debt.  Well no, because even though the Chinese are pulling away from our US Treasury bonds other countries in Europe, South American and other parts of Asia have stepped in to take up the slack in terms of lend us money.

Japan maintained its place as America’s second-largest lender, with $1.06 trillion of Treasuries in December, while Brazil held $226.9 billion, the Treasury Department said. Hong Kong held $121.7 billion at the end of last year, according to the data. Total foreign holdings amounted to $5 trillion, up from $4.44 trillion in December 2010.

As China’s demand for Treasuries has waned, buyers in Europe have taken up the slack as the region’s debt crisis worsened. Luxembourg increased its holdings by 74 percent to $150.6 billion last year, Switzerland boosted its stake 33 percent to $142.5 billion and Belgium’s position in the debt more-than-quadrupled to $135.2 billion.

So in the end China may show signs of staying away from our riddled credit, but other countries are stepping in to fill the void left by the Chinese, but that is not the point because at the end of the day we in America need to call upon our government to stop there extravagant spending.  I am calling for cuts across the board, whether it be health care, defense, transportation, energy social security, and whatever can be cut there needs to be a slimmer and more efficient government that can run on the revenue from our American taxes instead of borrowing it from other countries. That is what I believe that we should do in terms of helping our country get out of this debt.