China Loves The Dollar

Derek Scissors / July 18, 2009

Remember when China was going to stop buying American bonds and the world was going to end? This hand-wringing was always wrong-headed; perhaps now it will finally cease.

In May, net official Chinese holdings of U.S. Treasuries jumped $38 billion. This is the flip side of the return of large-scale capital inflows into the PRC, after these were interrupted by the financial crisis.

Net official Chinese holdings of U.S. Treasuries do not constitute the last word. They miss some less direct Chinese purchases of Treasuries and all Chinese purchases of other American bonds, such as those sold by U.S. government agencies. Still, they are the most prominent signal of Chinese behavior. (more…)