China’s U.S. Treasury Holdings Hit Their Lowest Level Since 2008, Half the 2013 Level

[Financial News] China’s holdings of U.S. Treasury securities have fallen to their lowest level since August 2008.
According to Treasury Department data released on the 17th local time, Chinese investors held $618 billion in U.S. Treasury securities as of July, as recorded by U.S. banks and custodial institutions. That was less than half the $1.3 trillion peak recorded in November 2013.
The Financial Times (FT) interpreted the move as an indicator of changes in how Chinese authorities manage their foreign-exchange reserves, as well as deepening tensions among the world’s major economic powers.
It also pointed to intensifying economic and geopolitical decoupling between the United States and China.
The United States is grappling with high fiscal deficits and inflation, while China faces slowing economic growth and deflationary pressures despite running a record trade surplus.
Wei Li, head of multi-asset investment at BNP Paribas Securities’ China unit, said the decline in China’s U.S. Treasury holdings was "part of a global trend toward diversifying investments into other assets, such as gold, government bonds and stocks linked particularly to the artificial intelligence (AI) boom."
Experts believe China’s actual holdings may be obscured because it also holds substantial amounts of U.S. Treasury securities through third-party custodians such as Belgium’s Euroclear and Luxembourg’s Clearstream.
China’s move to sell U.S. Treasuries accelerated after the United States froze Russia’s overseas assets following Russia’s full-scale invasion of Ukraine in 2022. The shift reflects concerns that China could face a similar situation in the future.
The trend also appears to have been influenced by foreign investors recently putting more money into U.S. stocks than U.S. Treasuries.
According to Deutsche Bank, foreign capital flowing into U.S. stocks in the year through June amounted to 2.8% of U.S. gross domestic product (GDP). Excluding the period immediately following the COVID-19 pandemic or the global financial crisis, this was the first time in the 21st century that inflows into U.S. stocks exceeded the 2% recorded for U.S. Treasuries.
Alicia García Herrero, chief Asia-Pacific economist at investment bank Natixis, said, "China’s main intention is to show the United States that it could sell large amounts of U.S. Treasuries."

[email protected] Lee Seok-woo, international affairs correspondent Reporter