| CHINA bought more than US$4.6 billion worth of U.S. Treasury securities in February, despite fears that the United States’ top foreign lender may be growing jittery about its massive holdings of U.S. government debt.
“I don’t think there’s any real evidence of a turn away from U.S. securities, certainly no evidence of a turnaway from Treasuries,” Brad Setser, a former Treasury Department economist now with the Council on Foreign Relations, said Thursday.
China is buying fewer U.S. government securities than in earlier years and has shifted away from long-term bonds and securities issued by troubled mortgage giants Fannie Mae and Freddie Mac.
But analysts said the reduced overall purchases are because China’s foreign exchange reserves are growing more slowly. The past six months, China’s reserves grew by a monthly average of US$8 billion against US$38 billion in 2007, according to Nicholas Lardy of the Peterson Institute for International Economics.
One reason for the reserve slump is China has been stepping up purchases of foreign companies and natural resources. That reduces the amount of foreign currency China must recycle into Treasuries.
Chinese purchases of U.S. debt help fund the U.S. Government’s budget deficit.
Last month, Premier Wen Jiabao worried publicly about the safety of those investments. If China were to sell its massive Treasury holdings, U.S. interest rates could soar. But U.S. investors buy more than half of all Treasuries, and few think a major Chinese shift is likely. |
