Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Sea Otter who wrote (96427)	4/13/2009 7:07:47 AM
From: Dan3	Read Replies (1) of 116555

Everyone was expecting a continuation of the rally today, but some recent changes in China economic policy and the news from Germany (that their economy is shrinking at a 5% rate rather than the 2.5% rate reported until yesterday) may have pulled the plug: China Slows Purchases of U.S. and Other Bonds By KEITH BRADSHER Published: April 12, 2009 HONG KONG — Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released during the weekend by China’s central bank. China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year. China has lent vast sums to the United States — roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing. In the last two months, Premier Wen Jiabao and other Chinese officials have expressed growing nervousness about their country’s huge exposure to America’s financial well-being. Chinese reserves fell a record $32.6 billion in January and $1.4 billion more in February before rising $41.7 billion in March, according to figures released by the People’s Bank over the weekend. A resumption of growth in China’s reserves in March suggests, however, that confidence in that country may be reviving, and capital flight could be slowing.... ...The main worry of Chinese officials has been that American efforts to fight the current economic downturn will result in inflation and erode the value of American bonds, Chinese economists said in interviews in Beijing on Thursday and Friday. Lots more at: nytimes.com

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