China cuts US Treasury holdings to lowest level since 2008 amid debt ceiling fears
The stockpile has now fallen to nearly half its November 2013 peak, financial data shows, as long-term sell-off continues
China reduced its US Treasury holdings in October to its lowest level in 17 years, as mounting concerns over US debt sustainability and the Federal Reserve’s independence further eroded confidence in dollar-backed assets.
The country’s stockpile fell to US$688.7 billion in October, down from US$700.5 billion in September, according to US Treasury Department data released on Thursday.
October’s figure was the lowest level reported since November 2008, and marked a plunge of more than 47 per cent from the nearly US$1.32 trillion peak reached in November 2013, according to Chinese financial data provider Wind.
In March, China slipped to third place among foreign Treasury holders – behind Japan and the United Kingdom – continuing the gradual, albeit uneven retreat that began during US President Donald Trump’s first term.
In an article published on Tuesday, Yu Yongding, a former adviser to China’s central bank, warned of growing risks tied to US dollar assets.
He argued that America’s balance of payments rests on two pillars: the dominance of the dollar, underpinned by US military power, and a buoyant stock market driven by technological innovation.
“China’s rise could become the decisive force that brings both down,” he said, adding that the world’s second-largest economy “must achieve current account balance as soon as possible, reduce its reliance on external markets – especially the US – and minimise the risk of falling into the US dollar trap.”
Meanwhile, total foreign holdings of US Treasuries edged down to US$9.243 trillion in October from US$9.248 trillion in September, but remained above the US$9 trillion mark for an eighth consecutive month.
Japan – the largest foreign holder – increased its stockpile to US$1.2 trillion in October from US$1.189 trillion a month earlier. The second-largest holder, Britain, increased its holdings to US$877.9 billion in October, up from US$864.7 billion in September.
Canada, the fifth-largest holder, slashed its US Treasury holdings in October, with the stockpile dropping to US$419.1 billion from US$475.8 billion a month earlier.