After buying out more than $1 trillion in American debt, China has lost interest in buying some more. The country has decided to just keep its cash at home. This may be a disappointment for the Obama administration that aims to finance an $800 billion economic stimulus package for the US economy. For the US fiscal outlook where, according to Obama, the future holds “trillion-dollar deficits for years to come,” the disinterest of China becomes a frustration.

China seems to have momentarily lost its appetite for dollars and Treasuries. The country used to be the most active buyer of US debt that is used to pay deficits. China has done this mostly through short-term Treasury securities, U.S. Treasury bonds, and American mortgage-backed securities. It is known to normally allocate nearly one-seventh of its entire economic output to buy foreign debt.

The global economic meltdown has certainly redefined world economics. China has decided to keep its money for internal and domestic use. China, itself, has its own $600 billion economic stimulus to attend to. China may have $1.9 trillion in forex reserves but this has started to shrink. On the other hand, the world’s biggest economy has started to ‘become less dependent on one lender.’ The recession does change the global economic order.

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Via International Herald Tribune