China owns approximately $800 billion of U.S. Treasuries. Obviously they read too much Zero Hedge and watch too much Marc Faber because allegedly they lost $430 billion, nearly half a freaking trillion, on their Treasury stockpile.
They should have made a similar amount on their holdings as Treasuries have rallied massively of late, which can only mean they were short Treasuries (probably through derivatives trades with Goldman) as a hedge.
And to say that hedge has blown up would be an understatement. There are even rumours that Zhou has fled the country fearing reprisal from the Chinese Communist Party. Zhou should have been reading the Bail instead, as we've been warning about QE v. 2.0 and a treasury rally since March of 2009.
Many of you have seen this story. There was an update yesterday from Stratfor.
Rumors have run rampant in China that the governor of the People’s Bank of China (PBC) Zhou Xiaochuan may have fled the country, according to a report from STRATFOR, the global intelligence company.
The rumors seem to have started following reports on August 28 which cited Ming Pao, a Hong Kong-based news agency, which said that the Chinese government may punish some members within the PBC, including Zhou, due to an approximate $430 billion loss on U.S. Treasury bonds.
STRATFOR said it has received no confirmation of the rumor, and that “reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment.”
However, STRATFOR noted, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China prepares for a leadership transition in 2012.
STRATFOR also reported that Chinese state-run media and official government websites have run several high-profile reports about Zhou, which should be seen as an attempt to refute the rumors.
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