div align=”left”In a week which has seen those long quiescent bond vigilantes wielding their cudgel in the US bond market, it is notable that there has been a distinct change in official Chinese foreign exchange investment policy since last Summer, with a emstrongshift out of US agency debt and long dated bonds to short duration Treasuries and commodities such as copper/strong/em. Additionally, there has been an acceleration of bilateral trade deals with countries like Brazil and Argentina that bypass the dollar. /divdiv align=”left”While strategy remains opaque,emstrong it seems reasonable to infer that the country is now scrambling to reduce its huge exposure to dollar assets/strong/em as the implicit policy over the last 20 years of subsidizing exports to US consumers and recycling the resultant trade surplus back into US financial assets has run out of road. Moreover, as I have been warning repeatedly in relation to the downside risks on …