China is worried about its US assets
Washington needs to continue selling treasury notes to fund its $787bn stimulus package. Last month, the secretary of state, Hillary Clinton, urged Beijing to maintain its stock as she visited China.
"They are worried about forever-rising deficits, which may devalue treasuries by pushing interest rates higher," Frank Gong, a JP Morgan economist, told Reuters. "Inside China there has been a lot of debate about whether they should continue to buy treasuries."
The reasons for this statements are not hard to see -
1. Nancy Pelosi sermonising to China about Tibet.
2. Tim Geithner talking about China manipulating its currency.
3. The clash between US naval intelligence ships and Chinese patrol vessels.
Here is the catch, Chinese options limited on treasury bonds.
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