Will Hutton wrote a book called “The Writing on the Wall: China and the West in the 21st Century” (review here). The first part of it is incredible and the second is pedestrian, but its well worth the 17 or 18$ kindle price. In it he describes the west and China and their histories, if you’re a numbers junkie then its awesome.
In one section Hutton explains how China owns foreign debt, and how they really must do so.
Part of the issue is they need to stabilize or manipulate their rmb to the tune of the 30-40% undervluation, but also they need a place to dump their excess cash. The cash they hold, in great part, finanices their expansion and lending to SOE’s which are less than productive.
So when we hear China is dumping our debt, its actually a good thing for they will hurt more than we will. I mean where else will they put their cash? In Greece? In High speed death coffins ?
snippet from here
“BEIJING – Chinadivested $36.5 billionofitsnetholdingsofUSTreasurydebtinAugust….Themovewasthebiggestsell-offofdollarassetsbyBeijingthisyear, despiteasurgeinforeigndemandforUSfinancialassetsas
investorssoughtasafehavenamidtheEuropeandebtcrisis.”