It looks like the world’s second-largest economy is finding any way possible to prop up the yuan and stem capital flows. One of these methods is to slash its holdings of United States Treasuries.
According to new data from the U.S. Treasury Department, China reduced its holdings by approximately $66 billion in November to a total of $1.049 trillion. This is the biggest monthly decrease since December 2011, when it slashed its holdings by more than $100 billion.
China has been lowering its holdings of U.S. debt for six consecutive months. During that same time period, the yuan has weakened by four percent against the greenback.
Overall, Japan continues to be the largest holder of U.S. debt with $1.108 trillion. However, it followed China’s route by selling off around $15 billion. Foreign countries have been dumping U.S. debt for eight straight months as it sold $205 million in November – they also sold nearly $6 billion worth of U.S. stocks in 2016.
The relationship between China and the U.S. should be quite interesting over the next four years. Will China maintain the trend of reducing its holdings of U.S. debt or will it eventually tergiversate due to Donald Trump’s supposed sublime negotiating skills.
Leave a Comment