One of the big stories this week was about the massive sell-off of US Treausury notes by the government of China. Is this something we should be concerned about?

China, through its purchase of US treasury bonds, has become the largest holder of US sovereign debt in recent years. As of this past June, it held over $1.2 trillion of this debt. Why? The main reason is the US hasn’t had enough money of its own to cover expenses such as the Wall Street Bailout of 2008, military actions overseas, and those all-important subsidies for the fossil fuel industry. And since Uncle Sam has been very conscientious in recent decades about taking care of his billionaires and big corporations by making certain their taxes are at an all-time low, the money has to come from somewhere. China has been all-too-happy to oblige. It has created a scenario in which the US has literally been held hostage to the Chinese economy.

The decision on the part of the People’s Bank of China (PBoC) to sell off $106 billion comes in the wake of  its devaluation of the yuan earlier in August. The purpose was to allow China’s currency to “float” with the market, tying its value to other currencies – including the US dollar. Economists are in disagreement as to why the PboC decided to make such a move at this time, though it may be an attempt to get the International Monetary Fund to accept the yuan as one of the world’s “reserve currencies,” along with the US dollar, UK pound, the euro, and the Japanese yen. It may also placate those who have accused China of currency manipulation in order to benefit its own exports.

Significantly, the PBoC’s decision to devalue China’s currency came shortly after the release of a report showing a sizable decline in Chinese exports. The recent sell-off of US Treasury notes is intended to prop up that weakened currency.

This sale also comes after last week’s stock market crash (which, despite Pat Robertson’s rantings, has more to do with investors’ decisions to move into more stable assets than any divine intervention).

It would seem that China’s recent sell-off of US Treasury notes would cause bond prices to fall – but this has not happened, at least not to the extent that economists feared. Some believe that the move may be a tactic in China’s ongoing economic struggle for supremacy. However, that would be self-defeating, as a rapid sell-off of US debt would cause a fall in the value of US currency held by China.

In the meantime, investors holding US bonds are breathing a sigh of relief as those yields continue to hold steady. As for determining what China’s ultimate game is, we can only watch and wait.

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K.J. McElrath is a former history and social studies teacher who has long maintained a keen interest in legal and social issues.