China's WEF warning on its US Treasury sovereign debt holdings...orderly liquidation...

China has explicitly warned the debt markets...

A key rate setter for China's central bank let slip, or was it a slip, that Beijing aims to run down its portfolio of United States debt as soon as safely practicable.

"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian, formerly Port Arthur from Russian colonial days. Mr Li, one of three outside academics on China's Monetary Policy Committee, described the debt deals on Capitol Hill as "just trying to by time", saying it will not be enough to stop America's "debt dynamic" turning dangerous.

"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."

"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.

It appears this is the first time a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh US$200bn, on average, accumulated each quarter into other currencies and assets, mainly AAA euro debt from Germany, France and the hard core.

It is not clear how much US debt is held by SAFE (State Administration of Foreign Exchange), the Chinese central bank's forex arm. The figure is thought to be over US$2.2 trillion. What's clear is a large vexed seller is agog to let go.

The relevant ETF (NYSE: TBT) to capture this directional move, as confidence in US Treasuries slowly erodes, is the ProShares UltraShort 20+ Year Treasury; it seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index (the Index).