China may gradually cut its holdings of U.S. Treasury bonds and notes, in light of rising tensions between Beijing and Washington, state-backed ...
SHANGHAI: China may gradually cut its holdings of US Treasury bonds and notes, in light of rising tensions between Beijing and Washington, state-backed newspaper Global Times cited experts as saying.
With Sino-US relations deteriorating over various issues including COVID-19, trade and technology, global financial markets are increasingly worried if China would sell the US government debt it holds as a weapon to counter rising US pressure.
China has steadily decreased its holdings of the US bonds this year, although some market watchers suspect China may not have necessarily sold US Treasuries as it may have used other custodians to purchase Treasuries.Dropping to US$800 billion from the current level could mean shrinking its holdings by more than 25 per cent. Analysts say large-scale Chinese selling, often referred to as the"nuclear option", could trigger turmoil on global financial markets.
Another reason the state newspaper cited was the potential default risk in the United States as the debt of the world's largest economy has surged sharply to about the same size of its gross domestic product, a level not seen since the end of the World War II and well above the internationally recognised safety line of 60 per cent.
China is heavily exposed to the US dollar and dollar-denominated assets. Its official foreign exchange reserves stood at US$3.154 trillion at the end of July.
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