| Why does China buy Japan debt? | |
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| Jul 8, 2010 02:53 |   |
 | The data has shown that China has purchased 541 billion yen ($6.17 billion) in Japanese government bonds in first four months. It has already doubled more than a full-year record compared with 2005. Why does China start to increase its purchase of Japanese government debts? The State Administration of Foreign Exchange explains “As a responsible long-term investor, China maintains a diversification strategy for the investment of its foreign-exchange reserves.” It is speculated that China will probably decrease its holdings of US government bonds. Do you think China will adopt this someday? |
| Jul 15, 2010 03:29 | #1 |
| Foreign exchange is China's "nuclear weapon". I believe that the US also doesn't want to see China stop buying its government bonds. China can bargain with the US on RMB appreciation because it has a lot of US national debts. |
Last edited by TRAVELINGINCHINA: Jul 15, 2010 03:29 |
| Jul 24, 2010 07:08 | #2 |
| It certainly gains leverage with the governments if it holds substatial amounts of debt. Second, it pays China to invest in major economies that are struggling: they need revival so they will be strong customers... Third: from the last point, if China hadn't bailed out the US it would have lost much of its existing investment in US govt bonds. Fourth: China has so much money it has to invest somewhere and there are not enough private business options and there is a need to spread across different invetsment types. China is on course for ruling the world. |
| Jul 24, 2010 08:11 | #3 |
| Besides buying foreign gov. and senior debts, directi investing thru ownership of voting shares of foreign big co is another alternative for huge reserves to go... |
| Jul 28, 2010 01:29 | #4 |
| Quote:Originally Posted by APAULT Just exactly when did China "bail out the US"? Protecting existing investments and financing future Chinese exports is hardly a "bail out". "China is on course for ruling the world"? I seriously doubt that. If you owe the bank one million dollars then you have a problem. However if you owe the bank US$867 BILLION (as the US currently owes China) then the bank has a problem! |
| Jul 28, 2010 03:06 | #5 |
| 20 years ago Japan was also the world's predominant exporter with a huge surplus balance of trade. It's international reserves were staggering and growing exponentially. That year the real estate value of the tiny islands of Japan exceeded that of the entire United States with all it's natural resources and infrastructure. The capitalisation value of Japanese stocks was greater than the U.S. market. That same year the Nikkei reached an all time high of 38,957, more than four times it's present day value. In 1990 Japan was ordained by all and sundry as soon to "rule the world". The Japanese bubble was huge and inflated by many of the same economic ills currently afflicting China. Today Japan's public debt is double it's GDP and it's economy, as acknowledged on June 11 by it's new Prime Minister, "is in serious risk of total collapse." Don't count China's chickens just yet. Many a slip twixt cup and lip. |
| Jul 28, 2010 20:34 | #6 |
| It is taken into seriouse considerations when it comes to curb bubble in real estate whereby economy is taking off. We learn lesson from others and we are much better than Japan in every aspect although we had sufferred pains for almost half centry. US currency is not plunging with the rising of gold value after bail out. US did well in preventing dollar from depreciating via issuing public bonds or T-bills, which means the dominating status of economy is unshakable. Hope China could channel its reserves into capital assets overseas in key industries. |
| Jul 28, 2010 21:46 | #7 |
| The U.S. still holds all the aces because her debt is in U.S. dollars. As I said in my analogy with a bank, China now has the problem as the creditor, not the U.S as the debtor. The U.S. has many ways of reducing it's debt to China, the least likely of which is actually repaying it at the same value it borrowed it. That will NEVER happen! My bet is that it will soon recommence printing huge amounts of fiat money and simply inflate the debt away. A leading indicator will be a rise in the price of gold against the $US as inflation takes hold. The U.S. didn't get to be the worlds largest economy by playing fair. |
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