Federal Reserve

Japan on course to replace China as top US creditor

Beijing records 0.15pc gain in US treasury holdings while Tokyo shows 6pc increase

PUBLISHED : Wednesday, 17 October, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 2:05pm


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China is poised to lose its place as the United States' biggest creditor for the first time since the height of the financial crisis, blunting one of Mitt Romney's favoured attacks in the presidential campaign.

Chinese holdings of treasuries rose 0.15 per cent this year to US$1.15 trillion at the end of August, the latest government data shows.

Japan raised its stake by 6 per cent to US$1.12 trillion, on pace to top the list of foreign creditors by next month.

While Romney promises to label China a currency manipulator if he wins the election and says US President Barack Obama has been too lenient in trade disputes, foreign demand is a reason Treasury yields remain close to record lows, reducing the cost of credit for the government, companies and individuals.

"We would still have a great need for overseas money," said Dominic Konstam, the head of interest-rate strategy at Deutsche Bank, one of the 21 primary dealers that trade with the Federal Reserve.

"Whatever deficit we're running, we're going to supply a lot of treasuries and someone's going to buy them, and if it's not China, it will be someone else."

Romney has targeted China in his campaign and said that on his first day in the White House, he would have the Treasury Department list the nation as a currency manipulator, paving the way for more import duties.

"They've artificially held down the value of their currency, and by doing that the prices of their goods are artificially low," he said last month. "They must not steal jobs."

Romney campaign advertisements mentioning China ran 29,317 times in the 30 days to October 8, according to Kantar Media's CMAG. One advertisement called "Stand up to China" alleges that "China is stealing American ideas and technology".

Obama started a task force this year to identify unfair trade practices. In July, the US filed a complaint with the World Trade Organisation accusing China of imposing unfair duties on US car exports and followed up last month, charging the nation illegally subsidised exports of cars and auto parts.

Last week, the administration issued anti-dumping duties of as much as 250 per cent on solar products imported from China.