China meddling with a U.S. drone in the South China Sea has U.S. President-elect Donald Trump and fellow hawks seething. Yet as they fret about Beijing¡¯s military ambitions, they should be encouraged by its drawdown in the financial theater.
Beijing is selling its vast U.S. Treasuries holdings at a blistering rate ¡ª more than $41 billion in October alone. The sales are aimed at slowing the yuan¡¯s declines, a trend sure to irk Trump and panic investors worried China might lose control. Emergency liquidity injections are growing in size as banks estimate outflows may have topped $1 trillion since late 2015.
There¡¯s a silver lining in China¡¯s debt drawdown: America¡¯s main rival is no longer its main banker. Japan just replaced China as the biggest holder of Treasuries in ways that matter as much in geopolitical terms as financial ones.
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