If you’re an investor in U.S. Treasury bonds, should you be worried that China may go nuclear? (No, not that kind of nuclear, the kind in the headline of a recent Reuters article about China’s supposed “nuclear option” to stop buying, if not outright sell, its huge holdings of American government bonds).
According to that report – speculation, really – China may consider retaliating against President Trump’s tough tariff talk by pulling its indirect support of the U.S. government, namely its holdings of about $1.2 trillion of Treasury securities. That makes it the largest foreign holder of that debt. Japan is a close second with $1.1 trillion, while Ireland (Ireland?) is a distant third with $328 billion. Altogether, $6.2 trillion of the U.S. government’s total debt of $20 trillion is held by foreign entities or about 31%. That would put China’s share at about 18% of the total foreign-held amount and less than 6% of the grand total.
In case you were wondering, the Federal Reserve holds about $4.5 trillion of the national debt or about four times what China owns. The Social Security Administration owns about $2.8 trillion.
So, is this something we really need to be worried about, even under the remote possibility that China would actually, in financial terms, cut off its nose to spite its face? Continue reading "Will China Nuke Its Own Treasury Portfolio?"