Rumor Mill: Chinese Lose $430 Billion in Treasuries?

From private intelligence service STRATFOR comes word that the whereabouts of China’s central bank chief may be unknown, and that he may have defected. Normally, we don’t put much stock in blatant rumors of such things. But we’ve followed STRATFOR for years, and typically they only publish when they feel sufficiently confident the information may have some basis in fact. According to STRATFOR:

Rumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within PBC, including Zhou.

Ming Pao has since strongly asserted that the information regarding Xiaochuan was incorrect and falsely attributed to them by a mainland news agency. STRATFOR points out that Xiaochuan’s name has been blocked in internet search engines by Chinese authorities.

We think the suggestion that a market player with the experience and depth of the Chinese could possibly have lost $430 billion in U.S. Treasuries recently is almost as outrageous as one that the PBC chief may have defected. STRATFOR notes that the strenuous efforts on the part of the Chinese to disavow the rumors may actually be cover against a power struggle within the country’s economic circles. Interestingly, there doesn’t seem to be much refuting the rumored Treasury losses.

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