Looks like all those worries (as irrational as they were) about China dropping its US Treasury bonds like a hot tudou bing can be put to rest – for a while, at least. Despite ongoing grumbling from Beijing about the risk of putting all its forex eggs in the US Treasury Department’s basket, China raised its Treasury bond holdings by US$38 billion in May, for a total of US$801 billion. That will make Washington stimulus pushers happy, but the story doesn’t end there. Beijing has been showing a preference for short-term instruments, indicating in a somewhat passive-aggressive way that it continues to question the dollar’s long-term prospects. Speaking of passive aggressiveness, take a look at what’s going on down at the Melbourne International Film Festival. The festival’s director, Richard Moore, has said that he refuses to drop a film about the life of World Uighur Congress President Rebiya Kadeer, defying demands from the Chinese consulate in Melbourne that the film be withdrawn. And there’s more bad news for Australia: To add insult to the injury of the detention of four employees of Anglo-Australian miner Rio Tinto by the Ministry of State Security, the China Iron and Steel Association is now in negotations with Rio competitor Vale. China reportedly hopes to get a better deal on iron ore contracts from Vale in exchange for preferential purchasing.
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