Mohamed El-Erian Sounds Alarm As China's US Treasury Share Hits 15-Year Low At 7%
Analysts suggest this de-risking is a direct response to the weaponization of the dollar, following the 2022 freezing of Russian assets.
By cutting its stake to “a quarter of the 28% peak,” China is signaling a permanent shift away from being the primary financier of American deficits.
Risks For The US Economy
The alarm sounded by El-Erian centers on who will absorb the massive supply of new debt as traditional “anchors” like China retreat.
While demand from Japan and the UK remains steady, the loss of China's massive buying power could lead to higher borrowing costs for the U.S. government.
If foreign demand continues to thin while the U.S. runs a trillion-dollar trade deficit, the resulting pressure on interest rates could threaten the delicate equilibrium of the global financial system.
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Economist Peter Schiff said that China's move will mainly prompt the Federal Reserve to buy the bonds, creating inflationary conditions for consumers.
China has advised its banks to sell U.S. Treasuries. That is very good advice. Soon foreign governments and many private investors will be selling U.S. Treasuries. The main buyer will be the Fed, creating inflation that will send consumer prices soaring. https://t.co/GGNU9tT9EQ
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As of Friday’s close, the Dow Jones index rose 2.31% year-to-date, whereas the S&P 500 was 0.33% lower and the Nasdaq Composite index was down 2.97% in 2026.
The SPDR S&P 500 ETF Trust(NYSE:SPY) and Invesco QQQ Trust ETF(NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Friday. The SPY was up 0.07% at $681.75, while the QQQ declined 0.21% to $601.92.
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