Chinese holdings of US Treasury securities falls to US$859.4 billion, lowest since 2009, amid rate hikes and tension
Chinese holdings of US Treasury securities have fallen to their lowest level since 2009, according to data released by the US Treasury Department.
The data showed that Chinese ownership of US Treasuries fell to US$859.4 billion in February, down US$13.2 billion from the previous month and the lowest since June 2009.
The decline comes amid rising tensions between the two countries and US rate hikes, which have made US debt less attractive to foreign investors.
The US and China have been locked in a trade war since 2018, with the US imposing tariffs on Chinese goods and China retaliating with tariffs of its own.
The US has also increased interest rates several times over the past two years, making US Treasuries less attractive to foreign investors.
China has traditionally been the largest foreign holder of US debt, but its holdings have been decreasing in recent months.
In January, China’s holdings were at US$872.6 billion, the lowest since October 2017.
The decline in Chinese holdings of US debt has been mirrored by a rise in Japan’s holdings, which increased by US$14.6 billion to US$1.11 trillion in February.
The US Treasury Department data showed that total foreign ownership of US long-term debt fell to US$6.13 trillion in February, down US$40.3 billion from the previous month.
The decline in foreign holdings of US debt comes at a time when the US government is running large budget deficits and issuing debt to finance its spending.
The US government is expected to issue an estimated US$1.5 trillion in new debt this year, and foreign investors could be deterred by the large supply of new debt.
In addition, the US-China trade war and US rate hikes have made US debt less attractive to foreign investors.
It remains to be seen how the decline in Chinese holdings of US debt will affect the US economy, but it is clear that the tension between the two countries is having an impact on the US debt market.