China’s total holding of US securities continued to rise from $922 billion in June 2007 to $1,464 billion two years later.6 Nor was this surprising. Panic and crisis, turned US Treasurys into the most desirable asset in the world. Everyone wanted safety. Treasury prices were rising, so too was the dollar. If China had wanted to diversify out of its dollar assets, this was the moment to do it. There was insatiable global demand for safe dollar assets. But what the crisis revealed was that China’s options were limited. What other safe assets were there to buy? For China to have bought Japanese
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