Chinese Herald News On May 15, the International Capital Flows Report (TIC) released by the U.S. Treasury Department showed that the scale of U.S. Treasury bonds held in March Chinese mainland was 767.4 billion US dollars, a decrease of 7.6 billion US dollars, which has been reduced for three consecutive months.
For the whole of March, overseas holdings of U.S. Treasuries stood at $8.09 trillion, up $119.9 billion month-on-month. Chinese mainland reduced its holdings of U.S. Treasuries for seven consecutive months, falling to its lowest level since April 2009.
On the other hand, Japan, the largest overseas holder of U.S. Treasury bonds, increased its holdings of U.S. Treasuries by a net US$19.9 billion in the month, increasing its holdings to US$1.1878 trillion for the fourth consecutive month, the highest since August 2022, before the Japanese government intervened in the foreign exchange market. The United Kingdom increased its holdings of US Treasuries by $26.8 billion during the month, reaching a record high of $728.1 billion, maintaining its position as the third largest holder.
Japan has been the largest overseas holder of U.S. Treasuries since June 2019, when its holdings overtook China's. For the whole of 2023, Japan's holdings only declined in February, May, and September, with a net increase of $63.1 billion in holdings for the year. As of March this year, Japanese holdings increased for six consecutive months and for the ninth month in the last 10 months.
Overall, overseas holdings of U.S. Treasury bonds as of January this year were 8.02 trillion yuan, a decrease of 32.4 billion yuan month-on-month. Chinese mainland reduced its holdings of U.S. Treasuries by $18.6 billion in January. According to the analysis, China's reduction of holdings is more like a passive reduction of old bonds after maturity and no longer buying new ones.
In March, Chinese mainland held US$767.4 billion in US bonds, a decrease of US$7.6 billion from the previous month, and its holdings fell for three consecutive months after two consecutive months, and its total holdings hit a new low since March 2009, still the second largest overseas holding country after Japan.
Since April 2022, China's U.S. debt holdings have been below $1 trillion. For the full year of 2023, China's holdings of U.S. Treasuries decreased by a net $50.8 billion. Only March, November and December showed an increase in the three months of the year, and in the nine months of the reduction, except for April and October, the decline was more than $10 billion. In March, only Chinese mainland, Belgium and France saw the largest decline, with Chinese mainland seeing the largest decline, with the latter two falling by $2.9 billion and $0.9 billion, respectively.
It is reported that July 2023-July 2024 is the peak of U.S. bond maturity. About $8.2 trillion of debt matured during this period, or about one-third of total outstanding debt. At the same time, the fiscal deficit of the US federal government is expected to be no less than $2 trillion. Combined with the $8.2 trillion in U.S. debt that is maturing, the U.S. needs to issue about $10 trillion in new bonds to achieve the goal of "borrowing new debt and paying off old debt" and meet fiscal spending needs.
Therefore, the United States uses chips and lithography machines to get stuck in the neck, and China backhands to reduce its holdings of U.S. bonds, paying attention to coming and going. Of course, this is not good news for the United States to issue new and repay the old, so Yellen's previous visit to China was from the perspective of U.S. debt.
On the one hand, the Fed's interest rate hike has led to a decline in the price of U.S. bonds, and the negative valuation effect has led to a passive decrease in China's holdings of U.S. bonds. On the other hand, the continued interest rate hikes in the United States will lead to a large amount of US dollars flowing back to the United States, and in order to maintain the relative stability of the exchange rate, the settlement in normal international trade needs to supplement the US dollar; Third, since the conflict between Russia and Ukraine, the United States has directly frozen Russia's dollar assets, and China and the United States have now entered the confrontation channel.
Of course, for the United States, it is not very unacceptable for China to reduce its holdings of U.S. bonds, and the current U.S. bonds are still the most popular financial products that the market is willing to buy after gold. Moreover, the main target audience of U.S. debt is actually the American people. According to the data, 70% of new U.S. bond issuance in the United States since 2023 has been purchased by American households.
China's State Administration of Foreign Exchange announced that as of the end of March, foreign reserves were 3.245657 trillion US dollars, standing at the 3.2 trillion US dollar mark for four consecutive months, an increase of 0.62% month-on-month, an increase for two consecutive months; Gold reserves increased for the 17th consecutive month in March. The State Administration of Foreign Exchange reiterated that the scale of foreign reserves is affected by the combined effect of factors such as exchange rate translation and asset price changes, pointing out that the US dollar index rose in March, and the global financial asset prices rose overall.