China increased its holdings of US debt for four consecutive months, exceeding US$ 900 billion, ranking first in the world. How does this affect China? What does it mean to increase national debt and inflation in China? To increase holdings of US Treasury bonds is to use the foreign exchange reserves of the central bank to buy bonds issued by the US government. To put it bluntly, the United States owes us 900 billion dollars. Of course it will give us interest. The increase of national debt is generally due to strategic needs. If we have to ask about the relationship with inflation in China, then from the source, we can say that China is a country controlled by capital account, and foreign currency cannot be directly circulated in China. Foreign exchange must be converted into RMB in the bank. These foreign currencies will eventually reach the hands of the central bank, which will issue base currency to exchange these foreign currencies. The base currency is printed by the central bank with a printing machine. The money will be released by lending to commercial banks, which will have a money multiplier effect, that is, more money will flow into the market. When there is a lot of foreign exchange, the RMB will overspend, and when there is more money in the market, prices will naturally rise. If there is more money and less things, inflation will occur. Inflation here mainly refers to imported inflation, which is caused by foreign exchange holdings.

In recent years, China has been a country with a trade surplus, with foreign exchange (mainly US dollars, but also a small amount of euros and yen). ) naturally, there are more and more. So much foreign exchange can't stay in the central bank and wait for depreciation. What should I do? Buying U.S. Treasury bonds, at least with some yield, is better than leaving it moldy. Our country has more than 2 trillion foreign exchange reserves, nearly half of which is used to buy foreign debts, and the other half is mainly used for the external payment and foreign investment needs of export enterprises.

I hope my explanation will help you.