China decreases holdings of US debt to prevent possible risks  

By Xie Jun Source:Global Times Published: 2018/12/18 18:03:39

Decreased holdings intended to prevent possible risks

China took action to decrease holdings of US debt in a bid to prevent potential risks, both in terms of financial risks and political risks, an economic expert said on Tuesday.

Latest data from the US Treasury showed on Monday that China's hoarding of US Treasury bonds continued to drop, hitting a 17-month low in October after five consecutive months of reducing US Treasuries.

According to the US Treasury data, the Chinese mainland's reserve of US Treasury bonds was $1.138 trillion by the end of October, compared with $1.151 trillion at the end of September and $1.183 trillion at the end of May.

China's move to cut US Treasury bonds comes at a time when the country's economic relations with the US are at a vulnerable stage. Although the two countries have recently agreed to a temporary truce in the trade frictions, the market has doubts as to whether the two major economies can reach an ultimate ceasefire as a result of their negotiations. 

Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, said that because of the "bullying behavior" of the US, China has to take precautions against potential financial actions launched by the US.

According to Dong, now more than 60 percent of China's foreign exchange assets are kept in US dollar-denominated assets. "China and the US were close trading partners, pushing China to hold a lot of US dollar-denominated assets, but with the worsening of the political climate, the Chinese government should multiply the sources of its foreign exchange assets, including increasing holdings of gold and European bonds," he noted.

Dong also stressed that because of the burgeoning budget deficit of the US government, the Chinese government wants to decrease holdings of US assets to prevent possible financial risks.

But experts stressed that such measures to decrease US Treasuries holdings are aimed at preventing risks rather than retaliating against the US.

"China won't use financial means to tackle the trade disputes," said Zhou Yu, director of the research center of international finance at the Shanghai Academy of Social Sciences.

He also stressed that China's selling of US debt won't be a long-term, deliberate trend.

Newspaper headline: China’s US bond reserves reach 17-month low


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