China hold­ings of US Trea­suries reach US$1.09tril

New Straits Times - - Business World -

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

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