China expresses confidence in their Fannie and Freddie investments (at least in public)

China's gov't is expressing profound faith in America's bankrupt agencies.  Now that the US has spent over $150 BB and counting on propping up these dead giants, people are starting to ask questions about how long the US will continue to support these monsters.  It is a good question that China needs to ask itself given that they own a huge (but still undisclosed) amount in the agencies. 

Of course they express confidence.  They have no real way of exiting their positions given the morbid state of the MBS market and latest Case Shiller numbers that show housing prices continue falling.  They just hope that the US government doesn't default on those Fannie and Freddie obligations.  Via WSJ:

China's government, one of the biggest holders of debt from Fannie Mae and Freddie Mac, voiced confidence that Washington would continue to stand behind the obligations of the U.S. mortgage giants after the Obama administration outlined options for phasing them out.‬

The statement by the State Administration of Foreign Exchange, or SAFE, the arm of China's central bank that manages foreign-exchange reserves, reflects Beijing's continued concern about perceptions within China of the safety of its U.S. investments. Most of China's $2.85 trillion in reserves is invested in dollar assets, and while China doesn't disclose the size of its holdings of Fannie and Freddie securities, past records show it owning hundreds of billions of dollars of debt from them and other U.S. government-linked agencies.‬

Chinese officials have raised concerns about the possible impact of U.S. policy on the future value of China's dollar holdings, saying loose monetary policy could hurt the value of U.S. assets. But the government has also rejected rumors that it has lost money on its existing holdings of Fannie and Freddie debt.‬


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