China's Retreat From Risky Bonds Could Be The Straw That Breaks California's Back

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Coming in at over $2.2 trillion, China’s foreign exchange reserves are an enormous force in global asset markets.In recent days, there have been reports originating out of the Asia Times that the Chinese government has given the word to state investment agencies to liquidate any US fixed-income holdings that aren’t EXPLICITLY backed by the US government.

Thus this could be straw that breaks California’s back.

The Telegraph notes that among the country’s non-officially backed US holdings is California debt. If it goes starts liquidating those — in the middle of the state’s budget crisis — then we’ve got serious problems.

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