70% of the estimated $1.95 billion dollars of China's reserves is in US treasuries, and China also holds about a quarter of US debt held by foreigners
Blogging Stocks and the Financial Times report that China’s official foreign exchange authority is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts. Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse of the dollar and global inflation.
China still buys US treasuries because it is the most liquid and largest world trading market. China's State Administration of Foreign Exchange (Safe) said that it would disrupt any other world market if China shifted its assets elsewhere. The actual amount of China's reserves is a state secret. However it is assumed the 70% of the estimated $1.95 billion dollars of China's reserves is in US treasuries, and that China holds about a quarter of US debt held by foreigners. Bottom line is that if the US economy crashes, so will the Chinese. So it is quite clear that over the long term China wants to cut its exposure to US treasuries and consequently has already eased restrictions for state owned companies to acquire competitors abroad.
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