While away at the weekend, I outlined on a notepad (real not virtual) some likely steps towards a serious worsening of the global bunfight – prior to the now inevitable second collapse. There were 23 in total….since whittled down to ten key events (see post later today).

On the 23 list, at number 15 was ‘China diversifies out of US debt certificates’. So as you can see, I thought that was well down the line.

Yesterday, China announced it had more than doubled South Korean debt holdings (KTBs) this year. At some 0.3% of total US debt held, this is peanuts. But over the same period, the Beijing regime cut its US debt holdings by 6%; and their usual assortment of ‘allowed to talk’ bankers and academics have made it clear that China will pile into the Korean currency – the Won – at an accelerated rate for the rest of the year. At the same time, the Chinese have been buying Japanese debt big-time – and still see these two Asian countries as safe-havens compared to US Treasuries.

We should also remember that pumping up the value of the Won is entirely in Beijing’s interests, as Korea is now, on the whole, a cheaper supplier to the West than they are – and thus a competitor.

“Higher yields offered by KTBs and potential Won appreciation would offer an attractive alternative to U.S. Treasuries for China,” suggested Matt Huang, a Singapore-based fixed-income analyst at Barclays Capital Plc. “But their total holdings are a drop in the pond relative to Beijing’s total reserves.”

Of course they are. But everyone should keep an eye out for the next safe haven Beijing chooses – and in the meantime, the US Federal Treasury cannot but see this as very bad news indeed. It’s yet another signal from China that massive QE will be frowned upon; and a pointer to the long-term problem faced by the US – it can’t keep on borrowing forever without improving its performance and outlook.