Since 2014, the People’s Bank of China (PBOC) has dumped approximately $250 billion of United States government debt. The purpose of the sale was to fund its stimulus projects, prop up the yuan and ease capital outflows. This irked many officials and investors in the U.S., partly laying the blame of the nation’s economic mess onto China.
It’s now being reported that China is also selling off billions of dollars worth of U.S. stocks.
According to new data from the U.S. Treasury Department, China’s accumulation of U.S. stocks actually declined by $126 billion, or 38 percent, from July 2015 to March 2016. It now owns a total of a little more than $201 billion.
“The Chinese, or other people for that matter, are taking the view that sitting in U.S. equities is presumably quite risky, and I’m not surprised they’re shifting,” said Fredrik Nerbrand, global head of asset allocation at HSBC Bank Plc in London, in an interview with Bloomberg News. “This seems like more of a generation of cash more than anything else, and probably a de-risking of their portfolio.”
Nevertheless, the Chinese selloff represents just a tiny fraction of the $23 trillion U.S. equity market. But it’s still something to be concerned about because the decline is immense when compared to other foreign investors’ holdings.
No one can expect China to hold onto stocks or bonds forever.
Boy are things overpriced, $23 trillion U.S. equity market???