China, flurry of US government bond sales: that’s what’s behind it
It was from the last major financial crisis that China didn’t hold so few US government bonds. It is significant that it is happening now, at a time when relations between Beijing and Washington are at their lowest and have only just begun the third presidential term of Xi Jinping. A move, that of largely selling American government bonds, which has economic-commercial but also diplomatic-geopolitical reasons.
Indeed, China is continuing to reduce its holdings of US Treasuries due to the increase in long-term interest rates, which reduced the returns on its overseas investments after the US Federal Reserve accelerated the increase in borrowing costs last year. January’s drop was more than double the $3.1 billion cut in December, though slightly less than November’s $7.8 billion drop.
While foreign holdings increased for the third consecutive month in January, those of China fell to $859.4 billion in January from $867.1 billion in Decemberregistering the sixth consecutive decline and marking the lowest point since May 2009.
The first reasons are of an economic and financial nature, but cloaked in political calculations. In fact, Beijing is increasingly wary of the dominance of the US dollar in international transactions, while its relations with the United States have deteriorated due to growing threats of financial sanctions from Washingtonwhich has been testing the ground in this sense in case Beijing were to supply Russia with weapons for the war in Ukraine.
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