Business Intelligence

Uncanny Partnership In Global Imbalances: China?s Continual Accumulation Of US Treasuries

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Executive Summary

The combination of American consumption excess and China's financial extravaganza in accumulating US treasuries has widely been perceived as a major contributor to the global imbalances. The current research examines whether this uncanny partnership can last long by concentrates on the Chinese side of the story, i.e. to what extent China may continue to accumulate the US treasuries. Evidence from the model simulation and analysis suggests that the inertia effect is the most powerful influence driving the continuation of the stockpiling. China's holdings of the American Treasury are so large that the management of this colossal wealth has become a process that has its own life and dynamics due to influences of behavioural factors and the internal governance elements of Chinese funds.

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