China, Other Nations Shy Away From US Investments

China has brought its US Treasury stash to a level not seen since the financial-crisis era. New data show Beijing’s holdings of US government debt slid to about $618 billion in July, the lowest since 2008, as China and other foreign governments step back from investing in the US, reports Axios. The New York Times strikes a similar chord in a story headlined “The World Economy is Becoming Wary of the US,” citing the nation’s $40 trillion debt, President Trump’s aggressive use of tariffs, and his “penchant for pushing the limits of the law.”

In economic-speak: “Geopolitical factors and US weaponization of the dollar through financial sanctions are causing central banks and other official investors to attempt to diversify away from dollar assets,” says Eswar Prasad, former head of the International Monetary Fund’s China division. As foreign governments step back, hedge funds and other private investors are increasingly stepping in, a shift that could nudge US borrowing costs higher because these buyers are more sensitive to price and market swings. Analysts warn that with a larger role now played by fast-moving investors instead of buy-and-hold central banks, a bout of market stress could trigger rapid selling and broader financial tremors.

Source: Newser