China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills

[Vance Painter]

China has dropped 97 percent of its holdings in U.S. Treasury bills in the last two years, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

 

In December 2008 just after the bank bailout and the stimulus law, overall Chinese holdings of U.S. debt stood at $573.7 billion. By December 2008, China owned $165.2 billion in U.S. Treasury bills, according to the Treasury Department. By March 2009, Chinese Treasury bill holdings were at $191.1 billion. By May 2009, Chinese holdings of Treasury bills were peaking at $210.4 billion.

 

At the end of March 2011 the publicly marketable segment of the U.S. national debt had almost doubled from August 2008, hitting $9.11 trillion. Of that $9.11 trillion, $5.8 trillion was in intermediate-term Treasury notes, $1.7 trillion was in short-term Treasury bills; $931.5 billion was in long-term Treasury bonds, and $640.7 billion was in TIPS.

 

Before the end of March 2012, the Treasury must redeem all of the $1.7 trillion in Treasury bills that were extant as of March 2011 and find new or old buyers who will continue to invest in U.S. debt. But, for now, the Chinese at least do not appear interested in buying short-term U.S. debt.

 

If no one else buys these T bills it is highly likely the U.S currency will likely further devalue. Some economist are predicting the US dollar may be as much as half  its current value against other major currecies this time next year if the out of control debt levels continue to sprial.