China remained our largest trading partner as the deficit with China rose to a record $28bln in August. Government officials have expressed strong displeasure with China’s unwillingness to appreciate its currency and this news will only serve to fan the flames.
As the largest holder of US treasuries in the world, China holds almost $847bln in US Treasury securities. Chinese officials are quick to express their own dismay with the US fiscal position, and that unease is reflected by continuous declines in treasury holdings during recent periods. In a somewhat frightening fashion, not only is Japan poised to overtake China as the largest US creditor, but our very own Federal Reserve is also on the verge of usurping China.
