China Continued Trimming Exposure to US Debt in April
Sergio Goschenko
Economics
China reduced its position on U.S. debt in April, reaching a 16-year record low in its holdings. The reduction is related to the ongoing tariff war scenario, where tensions between the two countries have escalated due to the enactment of sky-high fees.
China Reduced U.S. Debt Exposure in April, Reached 16-Year Record Low
Numbers emanating from the U.S. Treasury Department confirm that China is consistently reducing its exposure to U.S. debt, as the Asian nation shed some of its treasuries during April. China sold $8.2 billion of its U.S. treasury stash and is currently holding $757 billion still, even if it has reached its lowest exposure to U.S. papers in 16 years.
While a reduction of nearly 1.5% cannot be considered game-changing, April marks the second month in a row that China sheds exposure to the American debt papers. In June, China lightened its U.S. Treasury holdings by $18.9 billion, falling to the third place among U.S. debt holders.
The fall happened amid a trade conflict when President Donald Trump imposed sky-high tariffs of over 100% on Chinese imports. China also retaliated, imposing similar tariffs on certain U.S.-imported products.
As this conflict evolves, Chinese analysts have voiced their concerns about the possibility of these holdings being weaponized with a sanctions scheme. Wang Xin, director general of the People’s Bank of China research bureau, stated that there had been developments by other nations already heading in this direction.
He explained:
We have already witnessed significant shifts in this regard, including a decline in market confidence towards the US dollar.
Nonetheless, even with a recent downgrade from Moody’s, which highlighted the troubled status of the Federal Debt, total U.S. Treasury holdings are near all-time high numbers, with holders stashing $9.01 trillion in bills, bonds, and notes of different maturities.
While private investors chose to sell these treasuries in April, official institutions purchased $1.5 billion, showing the continued trust of central banks in U.S. debt, even with the current troubled outlook for the country’s economy.
Read more: Debt Reckoning: Moody’s Downgrades US Credit Amid Fiscal Freefall
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