China meddling with a U.S. drone in the South China Sea has U.S. President-elect Donald Trump and fellow hawks seething. Yet as they fret about Beijing's military ambitions, they should be encouraged by its drawdown in the financial theater.
Beijing is selling its vast U.S. Treasuries holdings at a blistering rate — more than $41 billion in October alone. The sales are aimed at slowing the yuan's declines, a trend sure to irk Trump and panic investors worried China might lose control. Emergency liquidity injections are growing in size as banks estimate outflows may have topped $1 trillion since late 2015.
There's a silver lining in China's debt drawdown: America's main rival is no longer its main banker. Japan just replaced China as the biggest holder of Treasuries in ways that matter as much in geopolitical terms as financial ones.
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