China re­duces US debt hold­ings

China Daily (Latin America Weekly) - - Page Two - By CHEN JIA chen­jia@chi­

China re­duced its hold­ings of US trea­suries to a seven-month low in Jan­uary, amid con­cerns that the world’s largest bond mar­ket might suf­fer head­winds from im­pend­ing in­ter­est rate in­creases.

The to­tal amount of US trea­suries held by China dropped to $1.17 tril­lion in Jan­uary, com­pared with $1.18 tril­lion a month ear­lier, the US Trea­sury De­part­ment said in data re­leased on Thurs­day.

It is the low­est level since July al­though China still re­mains the largest holder of US debt.

The to­tal US trea­suries held by all for­eign in­vestors shrank to $6.26 tril­lion, the low­est level in three months, down from a record-high $6.32 tril­lion in Oc­to­ber, the US Trea­sury said.

The mar­ket ex­pec­ta­tion of US rate hikes and ris­ing in­fla­tion has sup­pressed the US trea­suries’ value, es­pe­cially for the long-term ones, said an­a­lysts.

The 10-year US trea­sury’s yield in­creased to 2.82 per­cent on Fri­day com­pared with 2.4 per­cent at the end of last year, ac­cord­ing to the Trea­sury data.

It also stim­u­lated for­eign hold­ers’ to­tal net sales of US cor­po­rate bonds to $2.2 bil­lion in Jan­uary, up from the $1.3 bil­lion a month ear­lier, said the US Trea­sury.

A state­ment is­sued by the State Ad­min­is­tra­tion of For­eign Ex­change, China’s for­eign ex­change reg­u­la­tor, on Jan 11 de­nied that it has “de­lib­er­ately slowed down or sus­pended” an in­crease in US Trea­sury bond hold­ings, say­ing any de­ci­sion made on US trea­sury in­vest­ment is based on eval­u­at­ing the mar­ket sit­u­a­tion.

The SAFE has pledged to take pro­fes­sional mea­sures to man­age in­vest­ments of the world’s largest for­eign ex­change re­serves, which hit $3.13 tril­lion by Fe­bru­ary, down by $27 bil­lion from Jan­uary, ac­cord­ing to of­fi­cial data.

Pan Gong­sheng, the SAFE di­rec­tor and vice-gov­er­nor of the Peo­ple’s Bank of China, the cen­tral bank, in Fe­bru­ary af­firmed the for­eign ex­change re­serve’s func­tion as en­sur­ing ex­ter­nal pay­ment, sta­bi­liz­ing for­eign ex­change rates and se­cur­ing the na­tional eco­nomic and fi­nan­cial safety.

“The in­vest­ment should in­crease or at least re­tain the re­serve’s value, while op­ti­miz­ing its cur­rency and as­set struc­tures,” said Pan, who also stressed sup­port­ing the Belt and Road Ini­tia­tive and pro­mot­ing in­ter­na­tional co­op­er­a­tion on pro­duc­tion ca­pac­ity and equip­ment man­u­fac­tur­ing.

Luk­man Otunuga, re­search an­a­lyst at ForexTime, an in­ter­na­tional forex bro­ker spe­cial­iz­ing in forex trad­ing, said that the US is seek­ing to im­pose ad­di­tional tar­iffs on Chi­nese im­ports and this could weigh heav­ily on in­vestor sen­ti­ment.

In ad­di­tion, Wall Street re­mains vul­ner­a­ble to fur­ther losses.

That con­cern may fur­ther re­strain in­vest­ment into the US bond mar­ket, said an­a­lysts.

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