Reference News Network reported on June 21st according to a report on the website of Hong Kong's South China Morning Post on June 19th, China cut its holdings of US Treasury bonds to the lowest level in 16 years in April. US Treasury bonds have long occupied the position of the safest asset globally, and the escalation of the trade war between Beijing and Washington has raised concerns about the status of US Treasuries.

According to the latest data released by the US Treasury Department, China's holdings of US Treasury bonds fell to approximately $757 billion in April, a decrease of $8.2 billion from March. According to data compiled by Wind Information Co., Ltd., the figure for April marked the second consecutive month of decline and was also the lowest level since March 2009.

China has fallen to third place among foreign holders of US Treasury bonds (after Japan and the UK) in March. China continues to steadily reduce its holdings of US Treasury bonds, a trend that began during Trump's first presidential term.

On "Liberation Day," April 2nd, President Trump imposed "reciprocal tariffs" on allies and rivals alike. This move triggered global market turmoil, with a sharp drop in the US stock market, and a large amount of selling of Treasury bonds and the dollar.

The tit-for-tat tariff clashes between the United States and China quickly escalated, with both sides imposing tariffs at rates exceeding 100% until a temporary "ceasefire agreement" was reached in May, canceling most of the tariffs.

There are concerns that the trade war between the two largest economies could spread to financial markets. There is speculation that Beijing might sell off its substantial holdings of US Treasury bonds, while Washington may delist Chinese companies from the US stock market.

In light of the escalating tensions between the two superpowers, Chinese economists warned the United States against weaponizing the dollar.

At the Lujiazui Forum on the 18th, People's Bank of China Governor Pan Gongsheng expressed support for a multipolar global financial system and the internationalization of the renminbi. He did not directly name the United States but warned that heightened geopolitical competition could lead to currency wars.

PBOC Research Bureau Director Wang Xin stated that the future of the dollar depends on the economic conditions of the United States, the policy direction of Washington, and the emergence of viable alternatives. The dollar remains the dominant reserve currency worldwide.

Wang Xin said: "We have seen significant changes in this regard, and we have observed a decline in confidence in the dollar in the market."

Despite the reduction in China's holdings of US Treasury bonds, the total holdings of US Treasury bonds by other countries remain robust. In April, the total overseas holdings of US Treasury bonds, including short-term bills, medium- and long-term notes, and bonds, amounted to $9.01 trillion, a decrease of $36 billion from March but still the second-highest level on record.

Private investors net sold a total of $46.8 billion worth of medium- and long-term notes and bonds, which was the main driver behind the overall decline in the overseas holdings of US Treasury bonds in April. By contrast, according to US Treasury data, official foreign holdings of longer-term US Treasury bonds increased by $1.5 billion, with Japan and the UK increasing their holdings.

The UK remains the only major economy with which the United States has signed a trade agreement. Reports indicate that progress in negotiations between Japan and the United States has been limited as the deadline for Trump's suspension of "reciprocal tariffs" approaches.

Meanwhile, Belgium's holdings of US Treasury bonds - which some analysts say include part of China's US Treasury bonds held in custody accounts - increased by $8.9 billion to reach $411 billion. (Translated by Qing Songzhu)

Original article: https://www.toutiao.com/article/7518319801308119593/

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