Tan Kin Lian - Perspectives Make CNY an international reserve currency
The total foreign holdings in US treasuries as of today, January 20, 2024, is approximately 7.81 trillion USD. This data comes from the U.S. Department of Treasury's Treasury International Capital (TIC) system. You can find the latest numbers on their website:  https://home.treasury.gov/data/treasury-international-capital-tic-system

Breakdown: Japan and China are the two largest foreign holders of US treasuries, followed by other countries like the United Kingdom, Saudi Arabia, and South Korea. The remaining holdings are distributed among various institutions and individual investors worldwide.

Importance: Foreign holdings of US treasuries play a significant role in the global financial system. They help to fund the U.S. government's debt and contribute to demand for US dollars, which strengthens the dollar's value and influences international trade.

I suggest that China should issue 2 trillion USD (or 14 trillion CNY) in CNY bonds with an interest rate that is similar or slightly higher US bonds. Many central banks and foreign institutions may sell their US bonds and invest in China bonds, to diversify their reserves. 

How can China invest the 2 trillion USD that is received from the new bond issues? They can invest in the China stocks listed in the Hong Kong stock exchange ($5.36 trillion), Shenzhen stock exchange ($4.21 trillion) or Shanghai stock exchange ($5.83 trillion). Many foreigners have sold the stocks in these exchanges in recent months, leading to many stocks being seriously undervalued.
The purchase of $2 trillion will boost these stocks. 

When the international investors buy the CNY bonds, they are diversifying their foreign currency reserves. They can sell the CNY bonds and get CNY to pay for imports from China.  This will strengthen the financial system in China and strengthen the role of the CNY as a reserve currency. 

I do not know why the central bank of China hesitate to expand the role of CNY as a reserve currency. I believe that it is time for China to take this bold step, as its economy and financial system is now strong enough to withstand any major international currency flow.  

Tan Kin Lian 

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