'Something big is happening in China which could have a huge effect on the American economy. On Tuesday, Reuters reported: Senior Chinese military officers have proposed that their country ... possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.
Now, Asia Times is reporting: Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.'