China’s US Treasury holdings fall in April due to fluctuations of currency exchange rate, declining US dollar credit: expert
Published: Jun 16, 2023 04:47 PM
A staff member counts bank notes in a bank in Linfen, north China's Shanxi Province. Photo:Xinhua

A staff member counts bank notes in a bank in Linfen, north China's Shanxi Province. Photo:Xinhua

China’s US Treasury holdings fell $400 million to $868.9 billion in April, continuing to maintain its holdings below $1 trillion for the 13th straight month since April last year, according to data from Treasury International Capital (TIC), reporting system of the US, released on Thursday (US time).

UK, as the third largest creditor of the US, also reduced its holdings to $680.7 billion in April, down $30.4 billion from the previous month.

Compared with China and the UK, the US' largest creditor Japan increased $39.3 billion of US Treasury holdings to $1.13 trillion.

“Short-term fluctuations in US Treasury holdings tend to be related to exchange rates, but with the declining creditworthiness of US Treasury, high inflation and its financial unsustainability, there is a long-term trend for creditor countries to reduce their holdings,” Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Friday.

Japan and China both cut US debt holdings in 2022, data from TIC showed. Japan slashed its holdings by $224.5 billion and China by $173.2 billion.

Experts noted that creditors’ offloading is also rooted in the concerns that the US has in recent years markedly used the dollar, US financial systems and US-based public goods as weapons, and they started to diversify dollar assets.

With the US debt ceiling deal approved, the US Treasury will issue a large amount of Treasury bonds to replenish the cash line, and it is expected to see a trillion dollar influx of Treasury into the market during the year, some media outlets reported.

Dong said that if the US continues to issue Treasury bonds, the cost of its growth will be shared by the world.

"As the world's largest economy and the issuer of a major international currency, the US fiscal position and its policy choices have important spillover effects on the world economy, and it should adopt responsible fiscal and monetary policies," Wang Wenbin, a spokesperson of China’s Ministry of Foreign Affairs, said during a regular press conference on June 8.

China urges the US to earnestly adopt responsible fiscal and monetary policies, strengthen macroeconomic policy coordination with other economies, jointly safeguard international economic and financial stability and promote the world's economic recovery, Wang said.

Global Times