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Japan Overtakes China as Biggest Foreign Holder of Treasuries

Bruce Webb | February 17, 2010 1:21 pm

by Bruce Webb

I’ll let the other Bears comment on this one. I just thought the graphic useful. As always click to enlarge. For table plus footnotes click the link.
Major Foreign Holders of U.S. Treasuries

Tags: foreign exchange reserves Comments (2) | Digg Facebook Twitter |
2 Comments
  • spencer says:
    February 17, 2010 at 2:52 pm

    China’s trade surplus,as well as the US deficit has been collapsing over the past two years.

    For example. the  average
    chinese trade surplues for
    Nov, dec., Jan.

    2009-10…. $17.2 B
    2008-09…..$28.3B
    2007-o8…..$31.1 B
    2006-07…..$21.4 B

    The 2009-10 balance is down about 40% from a year ago
    and that was down about 10%.

    I will not bother to drag in the US data, but you will see
    a comparable drop.

    The biggest untold story of the Great Recession is the
    massive drop in US dependence on foreign capital that
    the recession has generated.  The flip side of this is that
    the Chinese surplus they have needed to invest abroad
    has also plunged.

    That is all this data is showing, the impact of the Great
    Recession on both countries external balance and the
    massive drop in US dependence on foreign capital.

    Japan has returned to its old position as number one because they
    are a true capital exporter as compared to China where their foreign
    investment is just shuffling funds from one account to another,

    Do not fall into the trap of the budget peacocks and make a big deal of
    something that is just a normal cyclical development.

  • kharris says:
    February 18, 2010 at 10:43 am

    Dragging spencer’s view into the future, the question raised is the extent to which the US savings rate has risen because of panic vs income and budget fundamentals.   Lost jobs come back, but savings misseed during the period of unemployment take time to make up.  Lost housing and stock value usually don’t “com back” in the sense that the old trend is recovered, even if the absolute high prior to the drop is recovered.  An the savings rate was ridiculously low prior to the bust.  So there are fundamental reasons the savings rate should rise over time, even as incomes rise.  But, to the extent that people have put off planned spending due to panic, even a fundamental trend toward higher savings could be interrupted for a considerable period as spending plans are carried out as panic subsides. 

    The improvement in the US trade accounts inspired by the bust may falter.  Timing will be critical, because a period of rapid “catch-up” spending would boost US demand, but also give China reason to delay restructuring in favor of greater domestic demand.

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