Jul 18, 2019 (China Knowledge) - Beijing is reducing its holdings of U.S. Treasurys for third straight month amid a yearlong trade war with United States. If China continues to reduce its US debt holdings, Japan will once again become the top foreign holder of American government debt.
China's U.S. debt holdings fell to a two-year low of USD 1.110 trln at the end of May, a reduction of USD 2.8 bln from April. The current balance is more than USD 90 bln below a high marked in August 2017.
Many analysts have pointed out that China is reluctant to engage in major sell-off of its Treasury holdings because the U.S. Treasurys offer the highest level of liquidity and safety.
One possible reason why China, being the world's biggest U.S. debt holder, is reducing US debt holdings may be the country's reluctance to buy more. The country has run a current-account surplus for four straight quarters starting in the April-Jun term of 2018.
On the other hand, China is increasing its purchases of gold. Beijing has been increasing its gold reserves for seven straight months through June, according to the People's Bank of China.
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