In China, Another Bout of Fannie-Freddie Fear

(Beijing) – When the U.S. government recently announced plans to wind down its monolithic mortgage institutions Fannie Mae and Freddie Mac, fresh shock waves rippled through some of China's largest, state-backed foreign investors.

And for good reason: Fannie and Freddie owe hundreds of billions of dollars – about US$ 454 billion combined as of June 2009 – to a wide range of Chinese investors, including the central government's State Administration of Foreign Exchange (SAFE) and some of the country's largest banks.

For years, these U.S. government-backed pillars of the American mortgage industry served as a symbolic backbone for China's foreign holdings. They also offered relatively solid yields with little or no risk.