As the trade war between the United States and China escalates, China is shrinking its holdings of U.S. bonds.
The latest official U.S. capital flows data show that China’s stash of U.S. Treasuries and agency bonds in the first quarter of this year fell by just under $40 billion and $10 billion, respectively, on a valuation-adjusted basis.
China is the world’s largest holder of foreign exchange reserves with a stash of $3.2 trillion at the last count in April. The currency breakdown is not publicly known, but experts reckon no more than 60% of that is in dollars.
China may have the largest pile of FX reserves in the world but the biggest foreign holder of U.S. Treasuries is Japan, with almost $1.1 trillion. Flows data show that Japan’s holdings of U.S. Treasuries rose by $51.4 billion in the first quarter.
This doesn’t necessarily indicate outright buying or selling, and China’s reduction could well be a result of Beijing…
