06 Apr 2009

The Crafty Chi-Coms

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For a client I am doing some digging into the international capital flows of the housing boom years. I knew China had accumulated a lot of Treasurys, but I didn’t realize how much of the world total they had. Don’t read this CRS report [pdf] for the analysis (which is ludicrous in my opinion) but just scroll through for the tables and figures.

As of June 2007, China held 9.4% of the rest of the world’s total holdings of US securities–that counts government debt as well as private equity holdings and other assets.

But here’s the real jaw-dropper: As of September 2008, China held 20.5% of all foreign holdings of US Treasurys, and Japan held 20%.

That is simply shocking. I think it is entirely possible that the Chinese government is running US policy at this point. They could crash the dollar tomorrow if they wanted.

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