China no longer top creditor to the U.S.
December 19, 2016 Category Finance, Weekly
China is no longer the biggest foreign creditor to the U.S. government, according to the U.S. Treasury Department. China has reduced its holdings of U.S. Treasury bonds in recent months to raise funds to mitigate capital flight and defend its currency, and is expected to keep doing so now that a rate increase by the U.S. Federal Reserve has started a new round of yuan depreciation. China cut its holdings by USD41.3 billion in October and a total of USD127 billion in the past six months. It now holds USD1.12 trillion, giving the No 1 title to Japan, which sold off less last month. “U.S. monetary policy has exerted great pressure on foreign central banks because of the globalization of financial markets,” said Tim Condon, Chief Asia Economist for ING. Beijing’s real exposure to U.S. treasuries might be bigger because it uses proxy holders. It has never made its holdings of U.S. government debt public. The composition of its USD3 trillion in foreign exchange is a state secret.
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