Janet Yellen, Secretary of the Treasury of the United States. Credit: IMF via Flickr
Almost as soon as China became a major buyer of U.S. Treasury holdings nearly two decades ago, American policymakers and pundits began fretting that they would one day sell them off rapidly — wreaking havoc on the U.S. economy in the process.
The past few months have been no exception. Headlines have proclaimed that China is slashing its stock of U.S. Treasurys after data came out showing that it fell to $970 billion in July from $1.06 trillion the year before, the first time in over a decade that figure has fallen below $1 trillion.
A closer look at the data, though, shows both that the recent reduction in China’s U.S. Treasury holdings is pretty modest, and that it remains a major foreign owner, with only Japan ahead. China has also been increasing its purchases of bonds issued by other U.S. government-sponsored institutions such as Fannie Mae or Freddie Mac, usually known as agency debt.
Of course, China could continue to sell down its Treasury stockpile, due to t
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