China’s Investment in the Ailing U.S.: Will Washington’s Big Creditor Turn Away?

The San Francisco Chronicle blog looks at the impact in China of the US takeover of mortgage giants Fannie Mae and Freddie Mac:

How will this move affect the United States’ major creditors like China?

A well-informed economist in China told Reuters that his country “has bought a lot of asset-backed securities, and there might be short-term improvement in price…” If the U.S. Treasury issues new debt to fund its Freddie-Fannie bailout scheme, “should China be a buyer or not?” Reuters asks. Its source noted: “For China, whether or not you buy the new Treasuries, there will be losses: if you buy them, you’re getting deeper in the hole; if you don’t buy, your existing holdings will lose value….”

Vice-Premier Wang Qishan, who oversees China’s economic and financial policies, has observed that, although the U.S. government’s effective “takeover of the mortgage lenders was a reminder of the investment risks China is taking” in the U.S., China “had little room to diversify its $1.8 trillion in currency reserves. Buying non-government dollar bonds would be even riskier, while the euro is expensive and yields in Japan are low.” Wang said: “If we don’t buy U.S. Treasuries and [asset-backed securities], what else we can buy?” He said. “China just has no way to avoid the risks. Whatever we do, we have to bear the losses.”

SUPPORT CDT

CDT on Twitter

Google Ads 1

CDT EBOOKS

Giving Assistant

Amazon Smile

Google Ads 2

Anti-censorship Tools

Life Without Walls

Click on the image to download Firefly for circumvention

Open popup
X

Welcome back!

CDT is a non-profit media site, and we need your support. Your contribution will help us provide more translations, breaking news, and other content you love.