China has offloaded USD 22.7 billion US treasury bills recently over concerns over security and a further delay to expected interest rate cuts by the American Federal Reserve, amidst its intensified strategic rivalry with Washington.
The world's second-largest economy offloaded USD 22.7 billion of the bills in February, with its total holdings adding up to USD 775 billion as of the end of that month, the Hong Kong-based South China Morning Post quoted figures released by the US Treasury Department on Wednesday.
China's forex reserves, the world's highest, totalled USD 3.2457 trillion last month, according to the state-run Xinhua news agency.
For years US treasury bills were traditionally China's preferred choice to invest its forex reserves but in recent years Beijing steadily diversified its reserves as its strategic rivalry with Washington intensified.
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“China's overseas investment has been concentrated on US Treasuries in the past, [but] there is space for the Chinese government to further cut back its holdings in the future,” Zhao Xijun, a finance professor at Renmin University in Beijing said.
"Beijing is concerned about the impending rate reductions in the US, which will affect returns,” he told the Post.
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Following a speech from Federal Reserve chairman Jerome Powell on Tuesday, economists now expect a further delay of cuts to the US benchmark rate, with reductions not predicted until September or even as late as next year.
Beijing, vigilant in the protection of its overseas assets, has slashed its holdings of US Treasury bills by 25 per cent since early 2021 to the tune of USD 280 billion.
Its position hit a 14-year low of USD 769.6 billion in October 2023, a decline commonly attributed to a conscious effort to diversify its holdings, the Post report said.
Zhao noted that shifts in overseas investments are highly dependent on context, mentioning Beijing has increased its investments in gold – a commodity noted for its reliability – after an analysis of the external environment.
However, observers say China's moves to diversify its assets are in keeping with rapid changes in geopolitics and its erratic relations with the US.
Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, said further sell-offs are possible even though US Treasury Secretary Janet Yellen brought up the issue with her Chinese counterparts during an official visit to Beijing earlier this month.
"I think the minute she said that the US wouldn't take ‘anything off the table' in response to China's overcapacity, [Beijing] wanted to give a signal that they were serious about dumping US Treasuries,” she said.
Officials from China and the US met in Washington on Tuesday to exchange their views on financial stability, regulatory cooperation, cross-border payment and combating money laundering as part of the recently established bilateral financial working group.
However, no details were provided.
Garcia-Herrero noted that the combined holdings of Europe and Japan are bigger than China's, meaning the US “could mitigate the sell-off” without “a major impact”, the Post reported.
FAQs
China has offloaded USD 22.7 billion US treasury bills recently over concerns over security and a further delay to expected interest rate cuts by the American Federal Reserve, amidst its intensified strategic rivalry with Washington.
What will happen if China dumps US Treasuries? ›
If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.
How much of US Treasury bills are owned by China? ›
China owns less than 3% of all outstanding Treasuries, the smallest share in 22 years, and again substantially down from the record 14% in 2011. Granted, China also likely holds Treasuries via other countries like Belgium.
Why is China selling US bonds? ›
China sold a record amount of Treasury and US agency bonds in the first quarter, highlighting the Asian nation's move to diversify away from American assets as trade tensions persist.
How much of the US debt does China hold? ›
China owns around 2.6% of U.S. debt, which it buys because the Chinese yuan is pegged to the dollar. It would be impossible for China to call in all its U.S. debt at once, given the different maturity dates of the U.S. securities that China owns. United States Department of Treasury.
What does China own in the United States? ›
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
What country owns the most US debt? ›
Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Who owns most of China's debt? ›
[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).
Who owns the most US Treasury bills? ›
The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.
Who is the US debt owed to? ›
Who owns this debt? The public owes 74 percent of the current federal debt. Intragovernmental debt accounts for 26 percent or $5.9 trillion. The public includes foreign investors and foreign governments.
2019 due to Russia & China selling their Treasury bonds? According to the US Treasury, Russian ownership of US Treasuries was $2.1 Billion in Nov 2022. That's so small an amount it might as well be zero.
Who is dumping US bonds? ›
China ramps up de-dollarization efforts by dumping a record amount of US bonds. China sold a record $53.3 billion worth of Treasurys and agency bonds in the first-quarter, Bloomberg reported.
How much is Russia in debt? ›
Russia National Government Debt reached 281.6 USD bn in Feb 2024, compared with 287.8 USD bn in the previous month.
Why is China's debt so high? ›
Li Daokui has estimated that local Chinese authorities had by 2020 run up a much bigger tally of debt than previously realized, at some 90 trillion yuan ($12.6 trillion). Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations.
Who has the most debt in the world? ›
United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%. The United States' government's spending exceeds its income most years, and the US has not had a budget surplus since 2001.
What happens if China stops trading with US? ›
The costs to the U.S. economy if we were to prohibit domestic companies (impacting companies such as GE, Honeywell, Collins, and Parker Aerospace) from engaging with COMAC would be significant: The U.S. Chamber of Commerce estimates that losing access to China's aviation market would translate into a loss of $38 ...
Can U.S. Treasuries lose money? ›
However, CDs and Treasuries are fixed income investments and subject to similar risks as other fixed income investments. For example, if interest rates rise, the price of a CD or Treasury will fall and if you need the investment prior to maturity and have to sell it, you may lose money.
What will happen to Chinese holdings of the U.S. Treasuries if Chinese authorities decide to let the yuan float freely as of today? ›
What will happen to Chinese holdings of the U.S. treasuries if Chinese authorities decide to let the yuan float freely as of today? Chinese holdings of U.S. treasuries will remain unchanged at the current level.
How much does the US owe China in 2024? ›
How much is the U.S. in debt to China? The United States currently owes China around $775 billion as of 2024.
