China complains of U.S. debt, but has too much at stake to dump dollars

It is the ultimate ''too big to fail'' global relationship, said Andy Rothman, an analyst in Shanghai for the investment bank CLSA. If Beijing even hinted that it might try to sell part of its U.S. debt, ''other countries might sell their dollar assets,'' Mr. Rothman said, noting that this would drive down the value of China's holdings. ''It would be financial suicide for China.''

From The International Herald Tribune:

China complains of U.S. debt, but has too much at stake to dump dollars
BY DAVID BARBOZA

SHANGHAI — However grim Washington's debt and deficit negotiations may seem to U.S. citizens, the impasse is nearly as disturbing for China.

As the United States' biggest foreign creditor — holding an estimated $1.5 trillion in Treasury securities and other U.S. government debt — China has been a vocal critic of what it considers Washington's politicized profligacy.

''We hope that the U.S. government adopts responsible policies and measures to guarantee the interests of investors,'' Hong Lei, a Foreign Ministry spokesman, said at a news conference last week.

Beijing might prefer to respond by starting to dump some of its U.S. debt. But in this financial version of the Cold War, analysts say, both sides fear mutually assured destruction. One reason America would want to avoid defaulting on its debt is that such a move could alienate China, which is a steady purchaser of Treasury securities. Beijing, meanwhile, already has too much invested in U.S. debt to do much more but continue to buy, hold and grumble.

It is the ultimate ''too big to fail'' global relationship, said Andy Rothman, an analyst in Shanghai for the investment bank CLSA. If Beijing even hinted that it might try to sell part of its U.S. debt, ''other countries might sell their dollar assets,'' Mr. Rothman said, noting that this would drive down the value of China's holdings. ''It would be financial suicide for China.''

http://www.nytimes.com/2011/07/19/business/china-largest-holder-of-us-debt-remains-tied-to-treasuries.html

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