China: Treasury sales - II
Quoting from the Financial Times of this Friday, China's Treasury Bill holdings dropped by US$38.8 billion. But that was only because China let the Bills mature; China re-invested only a portion of these proceeds - to buy $4.6 billion worth of longer-dated notes.
The article ends on the following note: "If the latest numbers (on China's reduction in short-term T-Bill holdings) mark the beginnings of a diversification by China away from US Treasuries and other dollar assets, a widely speculated rise in the value of the renmimbi against the dollar is on the cards."
I, for one, do not believe that China is about to diversify out of the dollar. Common knowledge is that the Americans own the world's deepest money and capital markets, so an issue of size enters the equation: where else can China park similar quantities of money?
The investment conclusion has to be that you need not worry about the RMB's dominant link to the US dollar.
