China Dumped U.S. Treasuries Long Before Taiwan Arms Deal
If last week’s call by Chinese military officials to dump U.S. Treasury bonds over the recent agreement to sell arms to Taiwan seemed haphazardly designed to strike fear into the hearts of U.S. government officials and strangely timed, you were probably right. It turns out that, in fact, China dumped those bonds last December.
The Financial Times reports that China dumped $34.2 billion in Treasuries in the month of December alone, which was enough to make China only the second-largest holder of U.S. government debt for the first time since September 2008. Of course, the Treasury Department didn’t have those figures on hand when Chinese military officials got busy posturing to the media over Taiwan.
Given the burgeoning Greek crisis and its potential downstream effects on Euro-denominated government debt, most analysts don’t expect another huge sell-off of Treasuries by China. But the more they can threaten it to get their way on foreign policy issues — see also, China policy under the Bush Administration — the more they’ll keep trying it.
