China runs large trade surpluses with the US. Typically these funds would be returned to the US as capital investments, through buys of fixed assets, securities or lending.
China, however, is liquidating stakes in companies in the US and selling off its portfolio of treasury bonds.
These two trends are resulting in enormous imbalances in balance of payments, which much be re-balanced via China’s central banking activities. China is clearly recycling giant capital pools from the US for investment purposes inside China and among China’s top trading partners.
And because the US dollars are never returned to the capital markets, it is also clear that China and the Brics countries are setting up their own trading and economic bloc, funded largely with US debt instruments.
Produced by: Inside China Business
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