China's holding of US Treasury bonds has dropped, according to US Treasury data released 16 February 2010, after Beijing expressed concern over the swelling US deficit and amid new US-China tensions.
The Treasury Department said foreign holdings of US Treasury bills fell by a record $53 billion in December. The record drop delivered notice that the government might have to pay higher interest rates on its debt to continue to attract investors.
Foreigners, especially the Chinese, have begun to worry about record-high US budget deficits and are looking to diversify their holdings.
A sustained drop in foreign demand for dollar-denominated assets could lead to higher US interest rates and falling stock prices. Economists claim that they see no evidence of such a shift yet.
Economists "see" what they're paid to "see."
Most economics is politically driven voodoo economics. Most universities should close their Economics Departments.