China Starts Selling Off Its Massive US Treasury Portfolio

China has been quietly selling off its massive US Treasury portfolio, and it's a trend that's been building for years. According to the data, China's holdings of US Treasury securities have been steadily declining since 2014.

The decline is significant, with a total decrease of $107 billion in just one year, from $1.23 trillion in 2019 to $1.12 trillion in 2020. This represents a 9% drop in just 12 months.

China's reduced holdings of US Treasury securities could have far-reaching implications for the global economy and financial markets.

China's US Treasury Holdings have taken a significant hit, with the country offloading the equivalent of $76 billion in US Treasuries over the past three months. This move has left China's reserves held in US debt at their lowest since 2009, at $767 billion.

China now holds less than 10% of the $8.1 trillion in Treasuries held worldwide in reserve. This is a notable decrease from its previous holdings.

According to US Treasury data, China holds only 2.2% of the total US debt, which reaches $34.537 trillion. This reduction in China's US Treasury holdings is a significant shift in its investment strategy.

The joint decision between China and other nations to conduct transactions in their national currencies has given a strong boost to their trade exchanges. Today, 90% of payments are made in rubles and yuans.

China is reducing its US Treasury holdings for several reasons.

One key factor is China's desire to diversify its economy and reduce its dependence on the US dollar. According to Stephen Chiu, FX strategist in Asia for Bloomberg Intelligence, China's sale of US Treasury securities could accelerate with the resumption of the trade war between the two nations.

China has been aggressively dumping US Treasuries, offloading the equivalent of $76 billion in the past three months. This is the largest amount in history, and it's a clear indication of China's intentions to move away from the US dollar.

The stakes are higher this time, as China is balancing its need to defend the yuan with its goal of reigniting economic growth. A stronger currency can stabilize investor confidence but risks stalling exports, a critical driver of the economy.

China's Treasury dump is closely linked to its strategy to protect the yuan. The People's Bank of China (PBOC) has been setting its daily reference rate stronger than 7.2 yuan per dollar, signaling its determination to support the currency despite market pressures.

China's reserves held in US debt are at their lowest since 2009, at $767 billion. This represents less than 10% of the $8,100 billion in Treasuries held worldwide in reserve, and only 2.2% of the total US debt, which reaches $34,537 billion.

Here are some key facts about China's US Treasury holdings:

China has significantly reduced its investment in US debt, offloading the equivalent of 76 billion dollars in US Treasuries over the past three months. This has brought its reserves held in US debt to their lowest level since 2009, at 767 billion dollars.

China now holds less than 10% of the 8,100 billion in Treasuries held worldwide in reserve. Its share of the total US debt, which reaches 34,537 billion dollars, is even smaller at 2.2%.

The People's Bank of China (PBOC) has been setting its daily reference rate stronger than 7.2 yuan per dollar to support the yuan despite market pressures. This has been done to protect the currency, which has been under threat since Donald Trump's election victory.

The PBOC's decision to set the fixing at a one-week high on Tuesday defied expectations that it might cave to market forces. This move was likely made to stabilize investor confidence and prevent a further drop in the yuan's value.

China's aggressive Treasury sell-off is closely linked to its strategy to protect the yuan, which has been a major concern for the PBOC since Trump's election victory.