China Has Divested 97 Percent of Its Holdings in US Treasury Bills

Saturday, June 4, 2011


President Obama and President Hu Jintao of China During a State Dinner on Jan. 19, 2011

China has dropped 97 percent of its holdings in US Treasury bills, decreasing its ownership of the short-term US government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the US Treasury.

Treasury bills are securities that mature in one year or less that are sold by the US Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of US Treasury bills are reported in column 9 of the Treasury report seen HERE.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term US Treasury securities. Prior to the fall of 2008, acccording to Treasury Department data, Chinese ownership of short-term Treasury bills was modest, standing at only $19.8 billion in August of that year.

But when President George W. Bush signed legislation to authorize a $700-billion bailout of the U.S. financial industry in October 2008 and President Barack Obama signed a $787-billion economic stimulus law in February 2009, Chinese ownership of short-term U.S. Treasury bills skyrocketed.

By December 2008, China owned $165.2 billion in US Treasury bills, according to the Treasury Department. By March 2009, Chinese Treasury bill holdings were at $191.1 billion. By May 2009, Chinese holdings of Treasury bills were peaking at $210.4 billion.

At the end of March 2011, by which time the Chinese had dropped their Treasury bill holdings 97 percent from their peak, the publicly marketable segment of the U.S. national debt had almost doubled from August 2008, hitting $9.11 trillion. Of that $9.11 trillion, $5.8 trillion was in intermediate-term Treasury notes, $1.7 trillion was in short-term Treasury bills; $931.5 billion was in long-term Treasury bonds, and $640.7 billion was in TIPS.

Before the end of March 2012, the US Treasury must repay all of the $1.7 trillion in Treasury bills that were sold as of March 2011 or find new or old buyers who will continue to invest in US debt. But, for now, the Chinese no longer appear to be bullish on the US.

This entry was posted in China, International News, News, U.S. Economy, US Debt and tagged , , , , . Bookmark the permalink.

18 Responses to China Has Divested 97 Percent of Its Holdings in US Treasury Bills

  1. feminazi says:

    Good. If the US loses this revenue source, it will spells the end of the expanding American empire and the US war machine will grind to a halt. War and empire don’t come cheap and without Chinese yuan to underwrite it, the US will be forced to draw down Iraq, Afghanistan and Libya. I’m delighted to read this.

  2. The Real Adam says:

    I think readers are beginning to understand why Barry wants and needs to get his paws in the $4 trillion in the Social Security Trust Fund.

    Being the world’s “only superpower” comes with a hefty pricetag and now that China is looking elsewhere to park their Yuan, the Social Security Trust Fund is the last place left to withdraw monies.

    If the American people let happen, no one under the age of forty will receive a dollar back from the FICA contributions we make each month.

  3. Brigadoon says:

    China has a much smarter monetary policy than us. They’ve been rigging the system ever since their economy started to grow at an astounding 10% per year. Everytime the U.S. asked them to buy our debt to pay for a new war, Beijing was only more than happy to invest short term because they knew long term, our addiction to war would result in us losing global position. China gave us the rope to hang ourselves and it’s working out as planned. Recently, the IMF said it is time for a new global currency standard and suggested the Yuan is the place to be in the 21st century. China played the U.S. like a fiddle, underpricing their currency which resulted in a worsening trade deficit making our goods and services more expensive. China’s economy is expected to replace ours as the world’s largest in 2020. Why would we think China is remotely interested in buying short term Treasury bills from a nation nearing default?

  4. Fred Dawes says:

    This move by the chinese is only the start Of some real evil times here in the USA. The real bedt is over 160 trillion and I can see the end of the USA Within 5 years.

  5. Fred Dawes says:

    This move by the chinese is only the start Of some real evil times here in the USA. The real debt is over 160 trillion and I can see the end of the USA Within 5 years.

  6. Mets Fan says:

    Let is all come tumbling down. I think this is the only hope.

    The financial troubles began before Obama, before Bush. It started when Nixon took us off the gold standard. The Treasury immediately started printing money not based on anything tangible but on a wink and a promise.

  7. Walk on Socks says:

    Thanks much for blogging this, Christopher.

    This is precisely the sort of article that belongs front-and-center in the New York Times and Washington Post. Where are the bloggers like DailyKOS and Huffington Post. Crickets, that’s where.

    The media and the blogosphere is gorging on a big helping of stupid, preferring to yap about utterly meaningless shit like Sarah Palin’s take on Paul Revere’s ride.

    I agree with feminazi. Maybe this chapter is the best thing that could possibly happen to the USA. Our addiction to war will finally be forced to come to an end.

  8. It’s not that big of a deal. They bought a bunch of short-term debt during the past 24 months or so because they saw an opportunity to make some quick change; now they’ve cashed out. They still held more than $1 trillion in US debt at the end of March–$1.145 trillion, more or less precisely, down from $1.175 trillion in November of last year but up from $895 billion in March of last year, which means that they were still buying quite a lot of long-term debt even as they were dumping their short-term holdings.

    Japan, our second-largest foreign creditor, held about $900 billion in Treasury notes at the end of March, up from $780 billion in March of last year. So both countries made really significant long-term investments in the US during the past year. Possibly they’re experiencing some buyer’s remorse as they wait to see whether or not the House Republicans really will blow up the economy (as opposed to simply letting it slowly bleed out), but they’re really, really unlikely to pull the plug no matter what.

  9. Eric Equality Kuntz says:

    U.S. Debt: $14,412,788,703,163 as of 11:06a.m. PST.
    U.S. GDP: $14, 734,876,591,028 as of 11:07a.m. PST.
    Debt per Taxpayer: $129,234

    Do the math. The U.S. economy is a house of cards on a windy day in September.

  10. Debbie Banuelos says:

    The other thing the “media” ignored was during Barry’s trip to Toledo, OH yesterday, after his ridiculous comments about the economy hitting “bumps in the road” to the recovery he claims we’re on, autoworkers booed Obama.

    CNN, MSNBC and Fox all reported “President Obama was warmly greeted today…..”

    Sorry, but he was NOT greeted warmly.

  11. Stephen Iversonn says:

    Japan is in no position to buy US short-term or long-term debt. Disruptions caused by the March 11th 9.0 earthquake, tsunami and nuclear crisis have had an impact beyond Japan industrial production.

    Japan’s factory output rose 1 percent in April from a record drop in March, the Trade Ministry said in Tokyo announced and joblessness advanced to 4.7 percent from 4.6 percent as payrolls fell.

    It looks like for the first time in modern history, the US will have to live within our means. Get used to it.

  12. ajihani says:

    The U.S. is like a spoiled, over-indulged child.

    Until someone steps up and acts like the parent, telling us “no,” there’s no impetus to grow up and act like an adult. Bush got us into this mess when he cut taxes for the rich while simultaneously starting the Afghanistan and Iraq wars. You can’t do both and as a result, the mindless, Zombie-like borrowing started. China and to a lesser extent, Japan, gladly bought out debt but even a high school economy student understood this couldn’t go on forever.

    Japan has suffered four consecutive recessions and now, they’re trying to pick up the pieces from the March earthquake. China is having its own problems. The Three Gorges Dam is more costly (and flawed) than they expected and hyper-expansion of cities is stretching their resources thin.

    I think this is a good turn of events. We all must live within our means. Even the U.S.

  13. Matteo says:

    “A great civilization is not conquered from without until it has destroyed itself from within.” – Will Durant, from http://911essentials.com

  14. fran says:

    The s@#t has hit the fan, but in classic fat cat style, the gvmnt goes right to cuts for the small people. Work till you’re dead (postponed retirement age), medicare cuts,
    slashed education budgets. So what does the government do?
    Demand tax cuts for the rich & insist on subsidies for big oil, which has billions in profits. All the upper echelon monies & breaks are sacrosanct.

  15. gordy three horses says:

    north american union here we come, better learn spanish and french.

  16. Gleneagle says:

    I had forgotten about the North American Union. This was a goal of Poppy Bush’s and even Bill Clinton was said to be interested. The only thing that has prevented the idea of coming to fruition is the failure of Mexico to function as a state. The drug cartels have so ravaged Mexico that even Pemex is under threat. Maybe there is something good about the cartels after all? Wouldn’t it be ironic if Canada, prosperous and free of wars and debt, turn the U.S. down if someone in Washington suggested the North American Union is an idea whose time had come?

  17. Gleneagle,

    America’s debt and Mexico’s disintegration have effectively put the brakes on the North American Union. You don’t even hear Stanford think tanks talk about it anymore.

    For that I am grateful.

  18. floridasandy says:

    i agree with stephen that japan is in no position to buy any more of our debt for the foreseeable future.

    i don’t even think the media can pretend that they are buying now.

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