Question

Why China does not sell its debt to US?

Answer 1

Over the past decade, there has been no short of calls for the sale of US Treasuries in China, but such a decision should by no means be a political one.The biggest reason China can't imagine selling its vast US debt is that many markets spot, loan, futures, and gold don't have the resources to absorb these huge reserves.

Any foreign assets held by a country could be exposed to political policy risks. From the market perspective, the extreme comment by an individual US politician should be perceived as risk. But investment decisions involving trillions of dollars should not be affected by such extreme statements. It is also true that there have always been calls for China to sell US debt or adjust its foreign exchange reserve structure, considering the large holdings of US Treasuries. China is the second largest foreign holder of US Treasuries, with holdings of over $1 trillion.

China is thought to hold a considerable amount of European and Japanese bonds. Now that the US dollar index is at a high point, existing European and Japanese bonds may have an investment premium from the exchange rate viewpoint, but in terms of credit risk, European debt and even certain sovereign bonds may have a significant default chance. After all, they do not have separate monetary policy and EU regulations are seriously limiting their fiscal stimulus.