China Expresses Sadness, Not Surprise, At The Downgrade, Ironically Communicating A Stance Advisors Might Take

 

Sure, you can focus on how Beijing is reportedly "flaying" Washington over this. But drill down.

 

China's official Xinhua news agency also provided a spectacularly lucid take on the situation laying out all the triggers, historical context, and a few prospects for where we might go now.

 

If you haven't put something together yet for your clients, this is a great place to look for ideas.

 

Xinhua actually got most of the venom out of its system a few days ago with a signed editorial praising Congress for kicking the debt can down the road by about "an inch."

 

Since everything Xinhua does is approved by the government, you can bet this reflected something like Beijing's real response to the long wrangle over the debt ceiling.

 

"Madcap farce" features prominently in the text, somewhere between "failing to defuse Washington's debt bomb" and "grueling game of chicken."

 

And as for whether China will start dumping its $1 trillion in Treasury debt any time soon, I personally don't see it.

 

They're understandably a little concerned and frustrated.

 

But with a full 31% of their currency reserves in dollar-denominated assets, they can't exactly shift gears immediately without taking a catastrophic loss and effectively ending the global credit markets.

 

And if they wanted to do that for some bizarre reason, why did they add a net $40 billion to their Treasury holdings over the last year?

 

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