For more than two decades, China has always been among the largest creditors of the United States, through holding a large amount of U.S. Treasury bonds.
However, the current picture has changed significantly. The share of U.S. Treasury bonds held by China has sharply decreased, from about 29% to only 7.3%.
Alongside this, their gold reserves have increased rapidly.
This shows that the world's second-largest economy is gradually reducing its dependence on U.S. public debt and shifting towards accumulating more tangible assets.
If the trend of declining demand for Treasury bonds from abroad continues:
• The U.S. will have to find new buyers.
• The Federal Reserve may need to expand the money supply to absorb the issuance.
• Or interest rates will have to be maintained at high levels longer than expected.
In the context of more than 9 trillion USD in debt maturing, this could be a warning signal for a period of significant pressure ahead.
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