China’s U.S. Treasury Figures Hold Steady, Overall ‘Derisking’ Policy Continues
The Facts
The figures of U.S. Treasuries held by China have been released by the U.S. Treasury, following the end of the federal government shutdown, revealing the continuity of the Asian giant’s previous “derisking” moves.
According to data released by the institution, China’s U.S. debt holdings increased marginally in August, reaching a total of $701 billion, only to be reduced again in September to $700.5 billion.
Even with the modest uptick, China’s holdings remain close to record lows, having reached a multi-year low of $696.9 billion in July. The numbers are currently 43% lower than their peak of $1.32 trillion in November 2013, reinforcing a continued selloff of these instruments.
In contrast, China has been continuously accumulating gold, with experts stating that official numbers reported may be dwarfed by actual figures.
Even so, the total number of treasuries held by foreign actors is over $9.249 trillion. This indicates sustained demand, even with the challenges faced by the U.S. economy.
Japan maintains first place across foreign treasury holders, followed by the U.K. and China.
Why It Is Relevant
Even with the current approach between the two nations after the so-called “tariff war,” China has not regained its full trust in the U.S. economy, maintaining its position of trimming exposure to U.S. debt.
This position is sustained by two concerns: the independence of the Federal Reserve, threatened by the current administration, and the ballooning state of the U.S. debt, which has reached over $38 trillion.
China has made public calls for the U.S. to safeguard the interests of investors and “take responsible policy measures to maintain the stability of the international financial and economic system,” after Moody’s downgraded the U.S.’s credit rating in May.
Looking Forward
China’s U.S. Treasury holdings’ evolution will naturally depend on Beijing’s relationship with the Trump Administration. But, even if these nations remain on good terms, China is likely to keep reducing its exposure to U.S. debt if the challenges faced by the American economy persist.
FAQ
What recent changes occurred in China’s U.S. Treasury holdings?
China’s U.S. Treasury holdings slightly increased to $701 billion in August but fell back to $700.5 billion in September.How do current U.S. Treasury holdings compare to previous years?
China’s current holdings are approximately 43% lower than their peak of $1.32 trillion in November 2013, indicating a continued selloff.What is China accumulating instead of U.S. Treasuries?
China has been consistently accumulating gold, with experts suggesting that official figures may underrepresent the actual quantities held.What impact do U.S. economic concerns have on China’s investment strategy?
China’s cautious stance towards U.S. Treasuries reflects ongoing concerns about U.S. debt levels exceeding $38 trillion and the independence of the Federal Reserve under the current administration.
