US Debt To Buy Japanese Debt: Diversification Of External Reserves And Investment

In May 16th, the figures released by the US Treasury showed that China reduced US $9 billion 200 million in US Treasuries in March. This is China's five month reduction in US Treasury bonds.

In that month, China's total holdings of US Treasuries amounted to 11449 billion dollars, still the largest holder of US Treasury bonds.

And Japan

At present, the yield of benchmark 10 - year treasury bonds in Japan is hovering around 1.1%, while the yield of us 10 - year treasury bonds is approaching 4% in the near future.

From the yield of treasury bonds, the yield of Japanese government bonds is far lower than that of US Treasury bonds.

The industry believes that the reduction of US Treasury bonds and buying Japanese bonds show that the diversification of China's foreign exchange reserves is accelerating.

"At present, although Japanese debt accounts for over 200% of GDP, it is relatively safe in developed countries compared with European countries."

Ding Zhijie, Dean of the school of finance at the University of foreign trade and economics, believes that not only the yield of US Treasury bonds and Japanese government bonds, but also the consideration of currency diversification.

In fact, in addition to this, US Treasuries are still facing the problem of "ceiling".

Recently, US Treasury Secretary Geithner said in a letter to Congress that U.S. Treasury bonds are expected to reach the $14 trillion and 290 billion debt ceiling permitted by Congress in May 16th, and that the supply will probably be disrupted in July 8th.

Bernanke, the chairman of the Federal Reserve, also claims that the government's legislators should raise the government's debt ceiling as soon as possible, otherwise it will pose a risk to the order of the financial system.

Cao Yuanzheng, chief economist at Bank of China (3.36, -0.02, -0.59%), said that the first point is that after the 2008 financial crisis, all regions of the world adopted the way of replacing private debt with government debt. The emergence of the European sovereign debt crisis reminded everyone to be vigilant about the sustainability of national debt.

"The United States is also faced with the problem of whether the national debt is sustainable.

This is why people worry about whether the US debt can be preserved or appreciated.

Cao Yuanzheng said that in such an objective situation, we need to take some protective measures in advance. The current measures are diversification of foreign exchange reserves.

Cao Yuanzheng also bluntly stated that under the current US dollar centered international monetary system, the dollar is still the main reserve asset, even if it is diversified, accounting for about 63%.

If we turn to other currencies, it will have an impact on the market.

For example, in March, China's holdings of Japan's 234 billion 500 million yen long-term treasury bonds, combined with the weakening trend of the dollar, and other factors have prompted the yen to continue to rise.

During the two sessions this year, the Secretary of the State Administration of foreign affairs, Yi Gang, said that China has been promoting diversification of foreign exchange reserves for many years.

In terms of currency diversification, Yi Gang introduced that in a basket of currencies, there are mainly convertible currencies, reserve currencies and emerging market currencies. In terms of asset allocation, as long as assets meet the requirements of security, liquidity and profitability, he will consider them.

In the past five months, China has reduced its total holdings of US Treasury bonds by US $30 billion 400 million, of which $11 billion 200 million was reduced in November 2010, and 4 billion US dollars in December. In 2011, it was reduced by 5 billion 400 million US dollars in January, and 600 million US dollars in February, and the reduction in March to US $9 billion 200 million.

The US Treasury figures also show that in the top 5 countries and regions with the largest US Treasury debt, Brazil has also taken a reduction action besides China.

In March, Brazil reduced its holdings of US $800 million treasury bonds, and its holdings fell to $193 billion 500 million at the end of 3.

In March, Japan, the United Kingdom and the oil exporting countries in the top five took actions to increase their holdings.

Among them, Japan holds second of US Treasury bonds, from 890 billion 300 million US dollars in February to US $907 billion 900 million, increasing US $17 billion 600 million.

Britain, which ranks third, increased its holdings by US $29 billion 700 million, and the total number of fourth oil exporting countries increased by 3 billion 500 million US dollars.