According to data released by the U.S. Treasury, China has sold off more of its U.S. Treasury holdings, bringing its current total to $756.3 billion, the lowest level since March 2009. While some may not consider this significant, it marks the third consecutive month of declines, signaling a new trend amid ongoing trade war concerns.
China Offloaded More of Its U.S. Treasury Holdings in May
The trade policies of the Trump administration have hurt the standing of the U.S. debt around the world, principally with heavy treasury holders like China that have been directly affected by these measures. According to recent data published by the U.S. Treasury, Chinese holdings of U.S. treasuries fell to a new low since 2009, with the Chinese government reducing its exposure by nearly $1 billion from the number reported in April.
While this might not be seen as a significant drop by some analysts, others claim that it signals a new direction in the Chinese policy towards acquiring American foreign debt, amidst the dangers of retaliation if trade negotiations go south.
In March, China reduced its exposure to the U.S. debt by nearly $19 billion, falling to the third place among the top holders of treasuries behind Japan and the U.K., while it sold $8.2 billion of its American debt stash in April.
Despite the continued selling and ongoing trade tensions between the two nations, China still holds $756.3 billion in U.S. securities, which contradicts the theory that the Chinese government is weaponizing these assets.
Nonetheless, the offloading moves echo the recommendations of Chinese analysts about diversifying the exposure from these potentially risky assets to less troubled commodities, including safe havens like gold and other metals.
The U.S. government’s measures have driven debt holders worldwide to adjust their exposures, driving a substitution of international investors for local buyers. While foreign buyers held 57% of the treasury issuance in 2008, this number has fallen to 32%, signaling potential trust issues in the proficiency of the current administration in dealing with the spiraling debt issue.
