China holdings of US Treasuries reach US$1.09tril

NEW YORK: China increased its holdings of United States Treasuries by the most in two years, a sign that the world’s secondbiggest economy is stabilising and stricter capital controls have helped to stem capital flight.

The nation raised its ownership of US government bonds, notes and bills by US$27.9 billion (RM120.56 billion) to US$1.09 trillion in March, the biggest increase since March 2015, said a monthly Treasury Department report.

That means China remains the second-largest foreign holder of American debt.

Adding the US$3.7 billion surge in Belgium’s ownership, which is often seen as a home to China’s custodial accounts, the total gain was the biggest since 2014.

China’s economy is staging a comeback as quickening inflation boosts factory profits, while stricter capital controls and a stabilising yuan help stem outflows.

The country’s coffer ticked up for the third month to US$3.03 trillion last month, after falling below US$3 trillion in January as the nation defended the yuan. Reserves are still down from a record US$4 trillion in 2014.

The yuan has weakened 0.6 per cent in the past three months and was last trading at 6.8928 per dollar yesterday.

“A lot of foreign demand is dependent on China’s demand: the fact that they’re such a concentrated holder means their purchases or sales will have an impact on the market,” said Aaron Kohli, a strategist at BMO Capital.

“Watching China’s sale has been the market’s obsession for the past couple of years. The question is whether China’s reserves are going to stabilise or keep dropping.”

Japan, the largest non-US holder of government debt, increased its total to US$1.12 trillion, up US$3.4 billion from a month earlier.

Total foreign ownership of US Treasuries amounted to about US$6.08 trillion in March — the highest since September, but down from a peak of US$6.3 trillion a year earlier. Bloomberg