China Issues $2 Billion in Dollar Denominated Bonds.
China Boosts its U.S. Treasury Holdings to $1.2 Trillion in 2017.
The Yuan’s percentage of foreign transactions and reserves remains miniscule.
Video Commentary to “Forget the Petro Yuan, Here Comes the Dollar Backed Yuan!”
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Death of the Petro Dollar via the Petro Yuan? Not so fast.
While the alternative finacial media and parts of the main stream media are crowing about the possibility of a petro Yuan that will end “DOLLAR HEGEMONY”, China issued $2 billion dollar denominated sovereign bonds. The debt offering was 11X oversubscribed.*
The issuance of a dollar denominated bond by China is signficant as it indicates China’s willingness to acccess foreign capital markets to satisfy its massive debt appetite. China relies on debt to fuel its growth. Up until recently nearly all of China’s estimated $25-40 trillion in debt (not including unfunded liabilities) was domestic debt with under $20 billion in foreign debt.
Why Didn’t China issue Yuan Denominated Bonds?
It is also significant that China did not attempt to issue sovereign bonds denominated in Chinese Yuan, despite its longer term plans to internationalize the Yuan. One narrative, albeit not originating from China, from the Nikkei Asian Review is that China will use gold to internationalize the Yuan by issuing a oil futures contract denominated in Chinese Yuan and convertible into gold on the Shanghai Gold Exchange. See here, here and here why this unsourced story is highly unlikely or just plain false.
During the week in which the HUGE STORY reporting the WAKE UP CALL for the Dollar because of the upcoming GAME CHANGER Petro Yuan, the Dollar Index soared.
China’s Progress in Internationalizing the Chinese Yuan
The Yuan’s use in international payments has slipped from 2.8% in August 2015 to 1.9% today.
Chinese are the number one foreign holder of U.S. Treasuries.
But but China has GOLD!
The internationalization of the Yuan is going to take years, if ever, to occur on a wide scale. China’s massive internal debt, little transparency into its financial reporting of that debt and capital controls (anyone believe China’s official gold reserve numbers?) make international investors wary of investing in Chinese companies and its sovereign debt.
More on this coming in “Smaulgld’s In Case You Missed it – Top Gold and Silver Stories for the Week ended October 29“.
* October 27, 2017- China’s dollar ten year notes were issued with a 25 basis point premium to the US ten year note. On the first day of trading spreads narrowed to about 10 basis points, indicating China’s credit is good (it should be given they have $1.2 trillion US Treasuries). The test will come when Chinese state owned enterprises attempt to price follow on US dollar bonds a lower premiums.
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