Treasury bonds sold

 

Something's wrong! China sold $15.7 billion in U.S. debt in three months, and Japan sold $14.6 billion in one month... Three major creditors collective reduction, what signal?

After three consecutive months of buying, overseas investors began to sell off again. In august alone, japan, china and britain, the top three foreign holders of u.s. debt, sold $24.8 billion.
In the top three U.S. debt holders, China has sold U.S. debt for three consecutive months, totaling $15.7 billion; Britain has reduced its holdings by $26 billion in three months; and Japan, the largest lender, sold $14.6 billion in August alone...
China sold $15.7 billion in U.S. debt for three consecutive months
Foreign investors held $7.083 trillion in U.S. debt in August, down from a record high of $7.097 trillion in July, according to recent Treasury data.
 China, the second-largest creditor, sold $5.4 billion in U.S. debt in August, down to $1.068 trillion. This has been China's three consecutive months of reducing U.S. debt, including June reduction of $9.3 billion, July small reduction of $1 billion.
 Although China remains the second largest creditor in the United States after the reduction, its position of $1.068 trillion has reached a new low since March 2017.

This year, In January, February and May, China increased its US debt holdings by $8.7 billion, In March and April, they reduced their holdings by $10.7 billion and $8.8 billion respectively.
While reducing U.S. debt, China has increased its investment in Japanese government bonds. Between June and August, China bought 2.2 trillion yen (139.9 billion yuan) of Japanese government bonds, a record quarterly purchase of Japanese bonds, according to the Ministry of Finance.
Countries are selling American debt
As the largest creditor in the United States, Japan reduced its $14.6 billion debt to $1.278 trillion in August, and remained the largest creditor in the United States. That month, the country held 6.3 percent of total U.S. debt, holding a low proportion of innovation.
In July, Japan held a sharp increase of $31.5 billion, a record high of $1.293 trillion. Japan surpassed China as the largest creditor to the United States in June last year and remains so far.
In August, the UK reduced its holdings of US debt by $4.8 billion to $419.9 billion, and its position remains the third largest holder of US debt.
This is the third consecutive month in the UK reduction, including a sharp reduction of $21 billion in July and a small reduction of $200 million in June. The UK increased its holdings by $22.3 billion in May last year, surpassing Brazil as the third largest holder of US debt. .
In addition, in August, Brazil, Canada, Thailand, the Netherlands, Israel, Australia, Spain, Sweden and other countries have reduced their U.S. debt to varying degrees. However, some countries have increased their US debt, including Ireland, Switzerland, Belgium, India, Singapore and France.
The U.S. fiscal deficit is record, and dollar assets are less attractive
 CNmoulding comments: now including our plastic injection molding industry, a large number of export industries still rely on dollars for settlement. If the dollar has really been indiscriminate, international settlement with yen, euro instead of the dollar will happen soon.

The yuan's exchange rate has soared, becoming a haven for global capital

 Unconsciously, the RMB exchange rate has risen from 7.18 to 6.74, up a lot. On the one hand, the rise of the RMB exchange rate shows that the United States has unlimited printing of banknotes and the value of the United States dollar has been reduced, on the other hand, China has taken the lead in controlling the epidemic situation, restoring economic growth and becoming a safe haven for global funds. But attention should also be paid to the impact on exports of rising renminbi exchange rates, and hot money inflows will increase the risk of volatility in domestic capital markets. From the bottom of March, the yuan rose from 7.18 to 6.74, up 4400 basis points, and rose 3.71 percent in the third quarter, the best quarterly performance in 12 years, after the 2008 financial crisis.

The RMB exchange rate rose sharply, corresponding to the decline of the dollar index. Since the outbreak, the Fed has been printing money to save the market, making the dollar liquidity flood, the dollar value naturally reduced, the rise in the renminbi is understandable. Since the outbreak of the new crown, the United States Congress has passed four stimulus packages, allocating nearly $3 trillion. On Oct.1, the U.S. House of Representatives voted to pass a new $2.2 trillion stimulus package. Imagine that ordinary American who don't have to work in the epidemic receive higher wages than Chinese white-collar workers, and someone must pay for the money. At the same time, China's first control of the epidemic, economic growth, but also make our country a safe haven for global funds, now the only investment in China is safe, only Chinese factories are fully resumed production. At present, the second wave of the epidemic situation in Europe and the United States has arrived, but our country dare to let go of control, the introduction of 8 days of National Day Mid-Autumn Festival holiday to stimulate the economy, Western countries can only envy and hate. To control the epidemic situation is, on the one hand, vaccine research and development, China's vaccine has entered the third phase of clinical trials, in the existing large number of clinical data, no one has side effects, the effect is very obvious.

But we should also guard against the negative impact of the rise in the RMB exchange rate on the economy. The rise in the RMB exchange rate will inevitably reduce the relative competitiveness of Chinese export enterprises, plastic injection molding business already face such a problem now. Japan was forced by the United States to raise the yen exchange rate, which greatly hit the export competitiveness of Japanese goods. In the end, Japan's economy fell into recession for 20 years. Even now, the GDP of 2019 in Japan has not exceeded the level of 1995.

Of course, the sharp appreciation of the RMB exchange rate, exports will certainly be hit. As Cnmoulding, now injection molds order is lower than before. However, since the outbreak, China's export situation has been improving and even positive growth has occurred in August, mainly because of the unparalleled superiority of our domestic perfect supply chain system under the great destruction of the global supply chain. Manufacturing in many countries has been hit hard by the epidemic. The impact of the RMB exchange rate on China's exports must at least wait until the epidemic is controlled. On the other hand, the inflow of hot money into the country will also aggravate the turbulence in the domestic capital market. The characteristic of hot money is that it comes and goes quickly, and if the Fed's policy changes, the enthusiasm will flow out quickly. The domestic stock market will fall into violent shock in a short time, this is also bad. Similarly, at the beginning of this year, the stock market in the United States fell into a continuous fuse, also because of the huge impact of the epidemic on the economies of various countries, countries have withdrawn funds from the United States market, the result of the withdrawal of hot money. A rise in the RMB exchange rate means that the value of the RMB is recognized by the international market, and the exchange rate rises by 5%, which means that the GDP has increased by 5%, and the overall national strength of our country is bound to rise. But we should also pay close attention to export competitiveness and the flow of hot money, control the rhythm.

Will the RMB yuan exchange rate against the dollar "break 8"? !

The RMB exchange rate in the recent period encountered a substantial depreciation, once set a 10-year low! 

But these two days, the RMB depreciation momentum also has no sign of releasing aid, easily broke through 1:7.1. On May 28th it hit 7.1964 at one point, followed by a slowdown in the renminbi and a rebound. As of the close, the yuan was 1:7.1364 against the dollar. Experts say the yuan is likely to continue to fall against the dollar in the short term and investors should be cautious about bottoming out.
 Now, everyone is looking for the reason why the yuan has plummeted? The main reasons for our analysis are as follows: first, the moderate depreciation of the RMB exchange rate is beneficial to Chinese export enterprises. Affected by the new crown epidemic, the European and American market demand plummeted, a large number of orders were canceled. At the same time, developing countries such as Russia, India, Brazil, and Argentina have also experienced outbreaks, and economic growth has also been affected by the epidemic. In order to enhance the competitiveness of China's exports in this special period and ease the export pressure of export commodities, it is necessary for China to keep the RMB exchange rate in a relatively low position.

 Moreover, domestic monetary policy is generally loose. After the outbreak, the domestic economy was restarted and investment plans for infrastructure projects were launched. This year has been several domestic cut, interest rate cuts, and our central bank has said that the follow-up cut, there is room for interest rates. It is clear that domestic monetary policy will continue to be looser in order for the economy to recover in the second half of the year, and in each case, the depreciation of the renminbi is expected

•  Finally, the outbreak of the new crown has brought uncertainty to the global economy, the European and American economies are depressed, and China's economic recovery is still some time. As a result, a large number of hot money are holding dollars to avoid risk, which led to the recent global "dollar shortage ", and the continued strength of the dollar index, always hovering between 98-100 high, which also led to a sharp fall in non-US currencies, and the dollar and the yuan exchange rate showed a negative correlation, so the yuan exchange rate has a trend decline.
•  Are many now worried that the yuan will fall below 8% against the dollar? I think this worry is superfluous. First, the current RMB has accelerated the pace of internationalization. On the one hand, Chinese A stocks are officially listed in international indexes such as MSCI, and some overseas hedge funds will flow into China through QFII、RQFII and other channels for asset allocation. On the other hand, China has launched the Shanghai crude oil and gold futures market, which is priced and settled in RMB. This will greatly promote the internationalization of the yuan, driving up the demand for the yuan for overseas investors, thereby promoting the appreciation of the yuan.
•  Second, the U.S. is also reluctant to see the U.S. dollar index continue to be strong, the yuan continued to decline. Because a rapid depreciation of the yuan's exchange rate would improve the competitiveness of Chinese goods. In the current global recession, the United States still wants the dollar index to depreciate and the yuan to appreciate, thus increasing the competitiveness of American goods exports. If the yuan continues to fall, it is believed that the United States will control the dollar's appreciation process. So, the RMB exchange rate against the dollar depreciation space will not be too much, let alone go to "break 8". 
•     Third, only if the RMB exchange rate remains relatively stable can it benefit China's economic development. Moreover, China's RMB exchange rate is not completely market-oriented, China in addition to more than 300 million foreign reserves, there are many instruments to regulate exchange rate fluctuations. such as reverse repurchase factors, issuing central tickets in offshore markets, tightening loose monetary policy, and so on. As long as the state is willing to do so, it can contain the trend of the RMB exchange rate falling continuously. So, we think there may still be a fall in the yuan, but the probability of "breaking 8" is basically zero.
•  After entering May, the renminbi has fallen all the way, especially in recent days, when it has fallen to record lows. The main reason is that the dollar has become a safe-haven currency, the dollar index is hovering high, plus China's monetary policy continued easing, which has increased the rate of depreciation of the renminbi. Although the renminbi has fallen sharply, it is impossible to "break 8 ;. Now all parties hope that the yuan exchange rate will be stable, which is conducive to the internationalization of the yuan, conducive to the recovery of China's economy, and the Central Bank of China is fully capable of stabilizing the yuan exchange rate and stabilizing the exchange rate in a large box.

• As an injection mold company foreign trade company, the depreciation of RMB is good for us, if the economy is not good, I believe the RMB break 8 will appear