Business Spectator: China to cease buying US Treasuries

...By far the most dramatic was the declaration that China did not plan to buy any more US treasury securities or bonds. The person who made the statement does not make that decision, but he is closely connected to the China hierarchy. He explained that the $US2.5 trillion of China’s foreign reserves held in US dollars was burdensome because it limited the flexibility of monetary policy and any appreciation of the Chinese currency would cause loss. China would therefore not be a buyer of US dollars but would not sell. China would look to diversify its holdings and was a buyer of European and Japanese government bonds as well as other currencies.

A statement along those lines in more normal times would have seen the Hayman phones running hot to sell US dollars.

But at the moment the US dollar, as the world currency, is gaining considerable support from the Middle East and other areas. In addition China is looking to increase imports and to reduce its surpluses. But longer-term when the main supporter of a particular asset says that they will withdraw their continued support, the value of the asset will fall. If China follows through on the Hayman declaration it is not good long-term news for the US currency...

Read the rest here.

Not sure how accurate this report is. But it pretty much is what I have been expecting for a while. China is not stupid. They know that we owe more money than we can pay back without recourse to the printing press. China figures (correctly IMO) that they will get paid back in debased currency and are probably moving to cut their losses.