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China & Japan Hold 1.7 Trillion Dollars !

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Ah yes. But how many DOLLARS are they holding?

The China Business News report said that most of the nation's foreign exchange reserves are held in bonds with high credit ratings issued by overseas governments, international financial organizations, government institutions and corporates.China does not disclose details of how it invests its reserves, but US dollar-denominated assets are believed to account for a sizeable portion of the holdings.

"Bearish for bonds perhaps - bullish for dollars should repayment ever be demanded!!!!!!!!

Edited by vinny

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..... but aren't US bonds only payable in their native currency = dollars ??

..... and aren't dollar-denominated assets only available to be capitalised as ..... dollars ??

First question - yep.

Second question - They will have to be serviced and/or bought back using dollars - if this is what you mean.

They are / will be a drain on the amount of dollars which are currently in US hands.

Scenario : They dump the bonds.

What MAY happen.

a/ Firstly they will need buyers for the said bonds - not easily done all at once!!!!!

b/ the market would be awash with bonds - therefore bond prices fall = US debt reduced upon bond maturing.

c/ Their reserves plummet.

d/ Buyers would have to pay in dollars = dollar shortage = dollar strength = deflationary effect in US.

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