Foreigners continued to buy American in May.
Overseas investors bought $45 billion worth of U.S. stocks and bonds, the government said Monday in its monthly Treasury International Capital report. That's up from $31 billion in April and above the $40 billion net purchase forecast by economists.
Among the big purchasers, as usual, were China, whose official stock of U.S. Treasury holdings rose by $7 billion to a globe-topping $1.16 trillion, and Japan, whose holdings rose $6 billion to $912 billion.
Despite the time lag, the numbers get eyeballed in the market because profligate U.S. spending and rampant overseas borrowing play on fears that our creditors will provoke a financial crisis by deserting us.
The dump-the-debt scenario is somewhat far fetched, of course. Foreign purchases of U.S. assets are probably more appropriately seen as an artifact of the yawning U.S. trade deficit. Those selling us stuff end up with dollars and buy bonds (and some stocks) with the proceeds. There is no great reason to expect funds to stop flooding into the United States as long as others continue to base their economies on selling stuff to us.
Nonetheless, the dollar-collapse fears are even more prominent lately as lawmakers toy with allowing the United States to default on its debt by failing to raise the debt ceiling before the government runs out of money next month.
But with Europe on the brink of a meltdown, it is not quite clear where all the money rushing out of dollars might go – which keeps the funds flooding into Treasury, at least for the moment.
China's exports are resilient, even as its biggest overseas markets, including Europe, falter. But a faster appreciation of the yuan won't necessarily slow that down.
FORTUNE -- China's closely watched trade surplus swelled to $22.3 billion in June, hitting a seven-month high amid troubles in some of the country's biggest overseas markets. Chinese exports rose 17.9% compared with the same period a year ago even as high unemployment in the U.S. MORENin-Hai Tseng, Writer - Jul 12, 2011 12:51 PM ET
China's holdings of U.S. government debt inched lower for the fifth straight month.
But America's biggest foreign creditor continued to hold $1.14 trillion of Treasury securities through official channels as of March – 26% more than Japan, the second-biggest lender to the United States.
And with China struggling with its own economic ills, such as slowing growth and persistent inflation, the idea of China dumping its dollar holdings seems more remote than MOREColin Barr - May 16, 2011 9:49 AM ET
As Europe's debt crisis unravels, leaders in the most troubled parts of the region have found an unlikely savior: China. Why its investments in Spain, Greece and Portugal are so smart.
Just as billionaire investor Warren Buffett swooped into the rescue when General Electric (GE) and Goldman Sachs (GS) found themselves battered during the height of the financial crisis, Greece, Portugal and Spain have found a vote of confidence from China MORENin-Hai Tseng, Writer - Jan 7, 2011 10:50 AM ET
The Republicans now have a platform to voice their positions on economic policy, even if their bills never land on President Obama's desk. Here's how they'll likely approach the hotly debated issues.
With the midterm elections behind us, the stage is now set for the 2012 presidential election. Like Democrats, Republicans on the campaign trail spent much of the time touting job creation. But now that the GOP dominates the MORENin-Hai Tseng, Writer - Nov 3, 2010 12:08 PM ET
Members of both parties are using China as a scapegoat for America's economic woes. But China is a key trade partner for many of these states, which is going unnoticed in the sometimes xenophobic attack ads.
With midterm elections only days away, a spate of political ads has emerged that treats China like an economic plague. Though polls show that the Democrats risk losing control of the House of Representatives, it MORENin-Hai Tseng, Writer - Oct 29, 2010 12:38 PM ET
Foreign funds flooded into the United States at the fastest clip since March, as U.S. trading partners sought to prop up the tumbling dollar.
Net foreign purchases of U.S. long-term securities hit $137 billion in August, Treasury said. That approaches the sum purchased in the previous three months and is the highest level since March's $159 billion.
China added 2% to its official U.S. Treasury holdings during the month. China's MOREColin Barr - Oct 18, 2010 10:13 AM ET
Global tensions are rising, and the weapon of choice is currency.
Brazil's finance minister has spoken flatly of an "international currency war." U.S. Treasury Secretary Tim Geithner was less inflammatory but warned in a speech this week that countries acting to make their currencies cheaper could lead to a "damaging dynamic."
Everybody wants export powerhouse China to let the yuan rise, but Premier Wen Jiabao lashed out this week, saying a rapid increase could cause a destabilizing MOREColin Barr - Oct 8, 2010 10:44 AM ET
There are some big macroeconomic signs that a U.S. stock market crash could be coming, but it's important to keep an eye on how October surprises play out around the globe.
By Keith R. McCullough, contributor
Lately there seems to have been an almost perfect storm of economic and political warning signs -- both domestic and global -- that point me towards one conclusion: the stock market is due for a crash. MOREOct 4, 2010 12:56 PM ET
The Carlyle Group co-founder says the U.S. threatens to fall behind China, thanks to our growing deficit and government debt. Meanwhile, Treasury Secretary Tim Geithner downplays the threat of a looming trade war.
Ever since China's economy surpassed Japan's this past summer, speculation has escalated over when the country might take over the United States as the world's largest. The estimate has ranged from 2030 to 2035, the latter date MORENin-Hai Tseng, Writer - Oct 1, 2010 9:23 AM ET
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