China Sells Record Sum of US Debt Amid Signs of Diversification (2024)

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China Sells Record Sum of US Debt Amid Signs of Diversification? ›

China Sells Record Sum of U.S. Debt Amid Signs of Diversification. (Bloomberg) — China sold a record amount of Treasury and U.S. agency bonds in the first quarter, highlighting a move to diversify away from American assets as trade tensions persist.

Since the U.S. dollar has a variable exchange rate, however, any sale by any nation holding huge U.S. debt or dollar reserves will trigger the adjustment of the trade balance at the international level. The offloaded U.S. reserves by China will either end up with another nation or will return back to the U.S.

While Chinese-owned debt is frequently drummed up as a political talking point, there's nothing particularly sinister about an export-oriented economy investing in Treasury securities. Treasuries are a logical investment for a country with high foreign currency reserves. China currently holds 9.6% of U.S. foreign debt.

Talk of de-dollarization is back on the table after new data from the US Treasury Department revealed that China offloaded close to $50 billion in US Treasuries in the first quarter and had reduced its holdings by more than $100 billion in the year through to March 2023.

Foreign holders of United States treasury debt

Of the total held by foreign countries, Japan and Mainland China held the greatest portions, with China holding 797.7 billion U.S. dollars in U.S. securities. Other foreign holders included oil exporting countries and Caribbean banking centers.

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

For all the focus on China, Japan is actually the top holder of U.S. sovereign debt, with a total of $1.1 trillion.

India takes the top spot. The world's most populous country owed $38.3bn to the WB at the end of 2022, down by almost $1.5bn from a year earlier. India's outstanding balance is almost double that of the next biggest debtor, Indonesia, with $20.6bn.

The United States supported China's entrance into the World Trade Organization at the turn of the millennium, which led to an export boom of Chinese goods into the U.S. China ended up parking much of its sales in U.S. Treasurys, CNN reported, because of their perceived safety as an investment.

Is China still buying gold? ›

The People's Bank of China (PBoC) continued its gold acquisition streak for the 17th consecutive month through March 2024. According to the World Gold Council, the PBoC purchased 224.88 tonnes of gold in 2023, following an acquisition of 62.1 tonnes in 2022.

gold is stored in fort Knox, the Denver mint and the San Fransisco mint. none of the gold has been sold off.

All these securities are backed by the full faith and credit of the United States government.

Consequences of Owing Debt to the Chinese

If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.

Estimate of External Debt of the Russian Federation as of June 30, 2024. According to the Bank of Russia's estimate, external debt of the Russian Federation as of June 30, 2024 totaled $306.1 billion, having decreased by $10.7 billion, or by 3.4%, since the end of 2023.

According to the US Treasury, Russian ownership of US Treasuries was $2.1 Billion in Nov 2022.

Selling Treasurys is a fast way to whip up U.S. dollars, and China will sometimes use extra dollars to go out on the global market and buy up their own currency. That artificially pumps up its value. It's like planting someone at an auction to drive up your prices. That's one idea.

The $34 trillion (and growing) gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts.

China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.