China’s holdings of US government bonds fell for the fourth consecutive month, hitting a 14-year low.
According to the South China Morning Post (SCMP) in Hong Kong on the 20th, China’s holdings of U.S. government bonds as of July this year reached $821.8 billion, down $13.6 billion from June.
As a result, China’s holdings of US government bonds became the smallest since May 2009. China’s holdings of U.S. government bonds have gradually increased since 2000, peaking in 2014 and falling below 1 trillion dollars in April last year.
China’s holdings of U.S. government bonds, the world’s second largest, fell for four months from $868.9 billion in April this year to $846.7 billion in May and $835.4 billion in June.
Looking at the long-term trend, the decline has continued for more than a year, except for cases that increased $320 million in July 2022 and $20.3 billion in March this year. China sold 14.4 billion U.S. government bonds from March last year to July this year.
Japan, which has been the world’s No. 1 U.S. government bond holder since 2019, has reduced its holdings by $116.5 billion since March last year, but has been increasing its holdings of government bonds again since the beginning of this year.
The deterioration of U.S.-China relations and rising geopolitical tensions are cited behind China’s reduction in U.S. government bond holdings.
In particular, the analysis that China’s sense of crisis over “dollar weaponization” has grown as the U.S. froze $300 billion worth of Russian overseas assets after Russia’s invasion of Ukraine, which began in February last year, is also gaining momentum, according to the SCMP.
Some Western experts, including the U.S., predict that Chinese authorities are selling U.S. government bonds and buying yuan due to slowing domestic economic recovery and weak yuan.
Chinese state media, which have recently reacted sensitively to the “China crisis theory” from the West, linked China’s decline in government bond holdings to the “U.S. crisis theory.”
China’s state-run Global Times said, “China’s long-term strategy reflects the gloomy outlook that the U.S. economy could enter recession next year,” adding, “Geopolitical tensions are another factor.”
