Buying U.S. Treasury bonds is a win-win result between China and the United States, or a second-best choice before there is no best choice at this stage. To put it bluntly, buying US Treasury bonds means that China earns too much US dollars by exporting foreign trade (that is, the world factory), and China has foreign capital, all of which are introduced in US dollars; In order to preserve and increase the value, China buys US Treasury bonds.
Buying US Treasury bonds can reduce the pressure of RMB appreciation; Conducive to our exports and increase our employment!
The first power in the United States has the highest national credit; Buying US Treasury bonds is the safest; At the same time, the American financial market is developed and trading is free; Convenient for us to buy and sell! There is also fixed income; Buy American debt in dollars, don't worry about exchange rate risk! Therefore, U.S. Treasury bonds are the safest and the income is stable, so you can't buy Iraqi government bonds!
We hold a large amount of American debt, which can make the United States stop fooling around and let them consider the feelings of our investors, such as not telling monks about things across the Taiwan Strait!
Disadvantages:
Even the yield of US Treasury bonds is very low. If the dollar depreciates, our foreign exchange assets will shrink in turn. There is not much China can do. It can only increase imports, reduce exports and increase domestic consumption through appreciation.
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If the dollar is used for domestic people's livelihood, it will lead to inflation; Because these US dollar equivalent RMB have been released, if US dollars are released again, it will cause more and more money, which will lead to rising prices and asset bubbles, and then the savings deposits of ordinary people will shrink. This is a move that harms others and does not benefit others. At that time, there will be a situation like before liberation, holding a bundle of banknotes just to buy a box of matches.
China's foreign exchange reserves are used to buy US Treasury bonds-the US dollars are not all our own. In addition to the US dollar foreign exchange earned by domestic enterprises, there are also foreign companies' investments in China or foreign exchange earned by their exports, as well as assistance from developed countries and loans from major financial institutions in the world, such as the World Bank; There are also some "hot money" that just want to earn profits in China in the short term. After they enter China, they will take the US dollars to the bank and change them into RMB for domestic use, and then our bank will release the same amount of RMB after receiving the US dollars; So these dollars are not all our own. At the same time, it can be exchanged for US dollars and transferred abroad at any time. Domestic enterprises also need to use US dollars at any time to buy technology, equipment, oil, ore and other raw materials abroad, because US dollars are the world's payment currency. These foreign currencies must be preserved and increased in value, and they can be paid at any time. Investing in US Treasury bonds is the best channel. US Treasury bonds have the best liquidity and the most developed financial market. All countries and financial institutions in the world invest in US Treasury bonds. To put it bluntly, they can cash their US Treasury bonds in the market at any time for their own use, as well as interest income.
References:
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