China isn’t dumping dollars. They’re dumping banks, and setting up a new financial system.

China runs massive trade surpluses with North America and Europe. Those markets pay in US Dollars or in Euro. Every day China earns about $2.7 billion USD and about 500 million Euro in surplus trade from those areas. Typically a country will re-invest those trading surpluses into investments into those same countries. In economics this is called Balance of Payments. China, however, is not doing so. They are instead bringing these surplus USD and euro out of Western banks, to capitalize a new banking system. China directed its Belgian custodian to liquidate $53 billion in US government notes and agency paper in the first quarter, and these moves almost certainly resulted in large trading losses. Interest rates are far higher today than when China bought the bonds, so any sales in the secondary market would reflect higher yields and lower market prices. That they were willing to accept steep losses on such a huge portfolio of bonds demonstrates a strong urgency to move the assets away from Europe as quickly as possible, and out of bonded debt as quickly as possible and into more liquid instruments. Many countries are anxious to establish and use a new financial system, a network of banks that is completely outside of SWIFT and of Western government oversight and sanctions risk. To capitalize such a system, large pools of USD and euro will be required to make markets and fund trade settlements. What’s more, the USD and Euro that are now in Chinese banks, in China, can be used to collateralize new loans in any currency, and create new economic growth elsewhere. Resources and links: Infographic, Visualizing China’s trade partners China’s $ Divestment in US Treasuries Signals Massive Shift From Dollar Assets China Sells Record Sum of US Debt Amid Signs of Diversification China’s US Treasury Holdings Becoming ‘Hostages,’ Academic Warns China Says Europe’s Soaring Trade Deficit Is Its Own Fault China Trade Surplus Hits New Record Hong Kong Vies With US in Bitcoin Crypto Hub with Landmark Bitcoin and Ether ETF Approvals How do banks create money