For years, Chinese money has been flooding into the United States. It’s a side of the equation that describes US/Sino relations that often gets overlooked.

Ever since 2008, China has been the biggest overseas financier of US debt. So it lends money to the US at rock bottom interest rates, and then the US can they afford to buy its goods.

It also ties in with the Chinese policy that has dominated global money flows for much of this century, namely maintaining a cheap yuan.

In China, for all the talk of debt, the savings ratio is massive – it is the point that Chinese bears overlook. Sure, parts of the economy are in massive debt, but other parts are in massive surplus. Looking at China has a whole, it owes money to itself – a bigger problem is that much of this money has gone into zombie projects, infrastructure schemes with no customers, or businesses that should have gone bust years ago.

But the Chinese state takes some of these savings and uses some of the money to buy US bonds, and in the process, maintains a cheap currency. Some US politicians hate the policy, some go further and blame it on all their ills – rhetoric that Donald Trump has capitalised on.

There is no doubt that the rise of China with its massive savings ratio was a contributor to the global savings glut that some say is the cause of much of the ill that infected the economy in recent years, creating deflationary forces and leading to ultra-low interest rates but which were unable to kick-life into the economy.

But even if this was true once – and the above narrative is controversial – China’s currency is no longer cheap, and Chinese authorities have recently been throwing money at trying to stop it from falling, selling US debt in the process.

A consequence of this has been a decline in China’s foreign exchange reserves, they have fallen from around four trillion US dollars a couple of years ago, to around three trillion. They fell by $69 billion in November, alone.

Meanwhile, China’s holdings of US government bonds dipped by $41 billion in October, to $1.12 trillion.

During the same month, Japan’s holdings of US government bonds fell $4.5 billion to $1.13 trillion.

Total Chinese investment in US bonds has fallen by around 25 per cent since 2014.

Bear in mind that the data relates to a period before the US election, since then, US bond yields have shot up, the Fed has increased interest rates, this will surely increase the allure of buying US bonds.