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The turmoil in the global financial markets has never subsided, and the economic strategies of various countries are even more dizzying.
Against this background, the latest data from the US Treasury Department reveals an unusual phenomenon.
China and Japan, the world's two largest holders of U.S. Treasuries, are constantly adjusting their holdings of U.S. Treasuries.
In the meantime, the changes in Japan have been particularly striking: the strategic shift from a large reduction to an increase in holdings seems to be a difficult trade-off between the Bank of Japan and the Japanese government.
At the same time, China's downward trend has continued, making room for continued growth in gold reserves. The strategic initiatives of countries around the world all point to the volatile and complex world economic situation.
The "gestures" of global central banks: from China to Japan
In an environment of rising interest rates and shrinking balance sheets in the United States, China and Japan, as major holders of U.S. Treasuries, have different strategies.
Over the past two years, China has continued to reduce its holdings of U.S. Treasuries by tens of billions of dollars.
According to the U.S. Treasury Department, China reduced its holdings of U.S. Treasuries by $22.7 billion in February, bringing its holdings to a record low of $775 billion.
This trend dates back to 2013, when China's holdings of U.S. Treasuries peaked at $1.3 trillion.
As a result of the continuous reduction of holdings, China's holdings have fallen by $525 billion, which is equivalent to about 40% of its holdings of U.S. bonds.
This kind of reduction is obviously releasing a signal, representing a judgment of the international economic situation and a strategy to adjust its own asset allocation.
The role of gold
China's reduction of its holdings of U.S. debt has been accompanied by an increase in gold reserves.
China has been increasing its holdings of gold reserves for 17 consecutive months, with China becoming the world's largest gold buyer last year, adding more than 220 tonnes of gold, the data showed.
China's official gold reserves now stand at 2,245 tonnes, although they are still far short of the more than 8,000 tonnes in the United States.
But this is a clear indication of China's strategic adjustment to US dollar assets and gold asset allocation.
Some media pointed out that the speed of China's gold hoarding is not only an economic consideration, but also a certain strategic significance.
Fluctuations in Japan
In contrast, Japan's movements are more tortuous.
In 2022, Japan sold a total of $220 billion in U.S. Treasury bonds, which is higher than China's.
Throughout 2022, Japan's sell-off was largely influenced by the US dollar's interest rate hikes.
The US dollar interest rate hike, which began in 2022, put extreme pressure on the yen exchange rate, causing the yen exchange rate to fall sharply.
In order to stabilize the yen exchange rate, the Bank of Japan had to sell its holdings of US Treasury bonds to support the yen exchange rate.
However, in 2023, Japan has begun to increase its holdings of US bonds.
In the whole of last year, Japan increased its holdings by more than $60 billion, and continued to increase its holdings by $31.3 billion in the first two months of this year.
Although the seemingly simple operation of reducing and increasing holdings in these economic dynamics, behind the strategic intentions of various countries and the complex economic situation are hidden.
However, it is a fact that cannot be ignored that the Fed's balance sheet reduction and interest rate policy undoubtedly play a pivotal role in the global economy.
This not only affects the formulation of monetary policies of various countries, but also profoundly affects the position of countries in the global financial market.
Looking ahead, the Fed recently announced a reduction in its balance sheet, with the cap on its monthly holdings of U.S. Treasuries reduced from $60 billion to $25 billion.
This move may be a sign that the Fed is adjusting the direction of its monetary policy in preparation for a possible rate cut.
This signal will undoubtedly have a ripple effect on a global scale, and countries will have to reassess their monetary policy and asset allocation strategies.
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