Relax, Chinese-Held US Debt Is Safe

Published in Huanqiu
(China) on 16 May 2020
by Lu Qianjin (link to originallink to original)
Translated from by Liza Roberts. Edited by Patricia Simoni.
A few days ago, some United States senators proposed penalizing China for withholding information about the novel coronavirus. They also proposed using a portion of China’s central bank reserves in order to offset U.S. debt. According to statistics from the U.S. Department of the Treasury, in February 2020 China held approximately $1.09 trillion in U.S. national debt, making it the second largest holder of U.S. debt after Japan. How safe is it for China to hold U.S. debt? Will it be impacted by the pursuit of so-called “accountability” by American politicians?

It should be said that American politicians are enthusiastic about China holding U.S. debt, as the cost is one that the U.S. itself cannot bear.

If the United States really dares to offset U.S. debt held in China, that would mean defaulting on the bonds. U.S. Treasury bonds are popular in the international market, because they are guaranteed by government credit and the likelihood of defaulting is extremely low. These bonds have long been considered risk-free. U.S. Treasury bonds are also a cornerstone of the hegemony of the U.S. dollar, so its credit issues are critical. Once the credit is damaged, the entire hegemonic dollar system will also be damaged. Throughout U.S. history, the U.S. has maintained a very conservative attitude on defaulting national debts. Over the course of 200+ years, the U.S. has never directly defaulted on national debts. The wording of U.S. politicians’ freeze on the U.S. Treasury bonds that China holds indicates that they obviously do not understand the nature of these bonds.

Aside from U.S. citizens, the main body of investors in U.S. debt is quite extensive. Foreign residents, officials and international institutions hold a total of approximately $7 trillion in U.S. debt. Within this debt, $6.343 trillion are held in long-term bonds and approximately $724 billion are held in short-term bonds. China accounts for 15.5% of all foreign investment in U.S. debt, of which 17.2% is held in long-term bonds and 0.47% in short-term bonds. Once the U.S. moves to default, it will greatly weaken investors’ confidence in the solvency of the U.S. government and in U.S. dollar assets. It will also produce a situation where debt holders compete to sell their holdings, which would be a fatal blow to the U.S. economy. Moreover, the U.S. economy has already been severely impacted by the pandemic. Future economic recovery will, to a large extent, rely on the issuance of Treasury bonds. In order to penalize China, the credit of the entire U.S. Treasury bond system will be severely damaged. Clearly, the loss outweighs the gains.

Additionally, the financial market is quite sensitive to changes. If the market genuinely thinks the U.S. will freeze Chinese-held U.S. Treasury bonds, then some institutions would likely have already begun selling off U.S. debt. However, currently there are no abnormal changes in the international market. Clearly, everyone regards this plan as political grandstanding and does not think it has the potential for practical implementation.

As far as the U.S. Treasury bonds held by China, the main associated risks are still market-related risks including fluctuating exchange rates, interest rates, market risks, etc. However, these risks can all be avoided by means of market management. From the current point of view, U.S. debt remains a relatively liquid and secure asset. We do not need to be influenced by the clamoring of one or two American politicians. Choosing to sell off U.S. Treasury bonds must be decided with the utmost caution; otherwise it could damage China’s own national interests.

China’s buying and selling of national debts is normal market behavior. The U.S. needs to protect the rights and interests of investors and maintain the stability and safety of the financial market. If the U.S. uses its power to arbitrarily harm Chinese assets in the United States, then aside from Chinese countermeasures, the consequences of its actions would only hurt itself.



日前,有美国参议员提出要因中国“隐瞒”关于新冠肺炎的信息而惩罚中国,还提出要用中国央行储备中的部分美国债务来冲抵。根据美国财政部的统计数据,2020年2月份中国持有美国国债大约1.092万亿美元,是仅次于日本的第二大持有者。中国持有的美债安全性如何?会不会受到美国政客所谓“追责”行动的影响?

应该说,美国政客想在中国持有美债上动心思,代价将是美国自己所不能承受的。

如果美国真的敢拿中国持有的美债冲抵,就意味着债券违约。美国国债之所以在国际资本市场上受欢迎,就是因为其由政府信用担保,违约的可能性极低,长期以来有着“无风险资产”之称。美国国债也是整个美元霸权的基石,其信用问题至关重要,一旦信用受损,整个美元霸权体系也会跟着受到损害。纵观美国历史,美国在国债违约问题上一直保持着非常克制的态度,两百多年来从未出现过国债直接违约的情况。美国政客冻结中国持有美国国债的提法,显然对于美国国债的性质并不了解。

除了美国居民外,美债的投资者主体非常广泛,外国居民、官方和国际机构共持有美债约7.067万亿美元,其中长期债券6.343万亿美元,短期债券7235.78亿美元,中国占所有外国投资美债比例为15.5%,其中长期债券为17.2%,短期债券为0.47%。一旦出现违约行为,将极大地削弱投资者对美国政府偿债能力和美元资产的信心,会产生持有者竞相抛售的情况,这将对美国经济产生致命的打击。况且,美国经济受到疫情严重影响,未来经济复苏还要很大程度依赖发行国债,为了“惩罚”中国而损害整个美国国债的信用明显得不偿失。

此外,金融市场的嗅觉是非常灵敏的,如果市场真的认为美国会冻结中国持有的美国国债,一些机构和持有者可能已经开始着手抛售美债,但是现在国际市场上并无异动,显然大家也更多地把这种提法当做一种政治作秀,并不认为其有实际操作的可能性。

对于我们持有的美国国债来说,主要的风险还是市场类的风险,包括汇率风险、利率风险和市场风险等等。 不过,这些风险都是可以通过市场管理手段来规避的。从目前来看,美债仍然是流动性比较高、安全性比较高的资产,我们也没有必要受一两个美国政客叫嚣的影响,抛售美债这个选项一定要十分慎重,否则反过来将对我们的利益造成损害。

中国买卖国债是市场行为,美国需要保护投资者的权益,维护金融市场的稳定和安全。如果美国肆意利用手中的权力伤害中国在美国的资产,且不说中国的反制,其行为本身的后果就是搬起石头砸了自己的脚。
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