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By Byron King
Recently, the U.S. Treasury Department released data showing an 11% decline in official Chinese holdings of U.S. government bonds during the past year.
The Chinese government isn’t adding to its U.S. bond position. Nor is it rolling over its previous purchases. Instead, between September 2009–June 2010, Chinese holdings of U.S. bonds fell from $938.1 billion to $843.7. That’s a drop of over $94 billion over nine months.
The Chinese are backing away from U.S. debt. They’re reducing their exposure to the U.S. dollar, and by extension their vulnerability to a declining U.S. economy.
What’s going on? Is the decline in Chinese holdings of U.S. bonds strictly an economic assessment? Or is there something else afoot? What factions are driving this decision? And what does all of this mean for precious metals?