Chinese residents hold USD 167bn in US Treasury bonds and bills, the bulk of which is probably owned by the Chinese central bank. This corresponds to a mere 4 % of total Treasury securities outstanding, according to the economists at Allianz Group and Dresdner Bank in a new Working Paper “Would a hard landing in China lead to higher US interest rates?“. By contrast, Japanese investors, with a total portfolio volume of almost USD 700bn, hold four times as much. Nor would a hard landing in China necessarily be accompanied by a sell-off of US bonds by Chinese investors. A collapse in Chinese growth could well fuel even greater intervention by the Chinese central bank in favor of the USD, as imports fall and push up the current account surplus. This would actually boost demand for US securities and put downward pressure on interest rates.