The New York Times article titled, "China Slows Purchases of U.S. and Other Bonds" shows how the Chinese government has been managing their foreign currency reserves. Data released by China's central bank show that the Chinese government actually sold their holdings of US Treasuries during the first two months of the year. This trend was reversed in March when the Chinese appear to have started to once again buy foreign securities. It is thought that increased confidence in the Chinese economy may be the reason for the reversal but there could be another reason.
In the months preceding March, Chinese officials had been highly critical of the U.S. economic policies that included huge amounts of government spending. The Chinese are worried that the increase in spending along with the Fed printing money has the potential to bring on inflation which would dilute the value of their U.S. reserves. The Chinese find themselves in a precarious position. They have a vested interest in U.S. economic success. For now it would appear that the U.S. economy has become too big for the Chinese to allow it to fail.
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Im not too sure what to say to this article. I know we need the other countries to buy U.S. bonds to keep our government afloat, but really who's fault is it that we have to rely on these other countries? Ours. Our past generations of U.S. government officials have created such a enormous debt and unnecessary government spending that we have nothing else we can do today to lower it other than to rely on other countries to buy our bonds to keep more money in our country. And China is probably the largest buyer of bonds from the U.S. so if we lose them, I could definitly see our country scrounging around for money to keep us running.
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