Data shows China dumping record quantity of dollar assets

2024-05-27 08:58:35

(MENAFN) According to the latest data from the United States Treasury Department, China has unloaded a historic quantity of UNITED STATES bbonds in the first quarter of this year, marking a significant shift in the country's investment strategy away from dollar-denominated assets. The data indicates that Beijing divested a staggering USD53.3 billion in United States Treasuries and agency bonds during the initial three months of 2024, while concurrently ramping up its acquisitions of gold and other commodities.

This unprecedented reduction in foreign exchange reserves by China has sparked speculation among analysts regarding the motivations behind this strategic move. Some experts suggest that the decision to divest from United States dollar assets could be part of China's broader efforts to diversify its investment portfolio amidst escalating geopolitical tensions with the United States.

Additionally, the economic repercussions of Western sanctions imposed on Russia in the aftermath of the Ukraine conflict have also been cited as a contributing factor. Analysts posit that China may be seeking to mitigate similar risks by reducing its exposure to United States Treasury assets, particularly in light of the punitive measures taken against Russia, including the freezing of approximately USD300 billion in Russian sovereign funds.

Reports indicate that Euroclear, a Brussels-based clearinghouse often regarded as a custodian of China's holdings, offloaded a substantial USD22 billion in United States Treasuries during the reporting period, further underscoring China's strategic realignment of its investment portfolio.

As the second-largest foreign holder of United States Treasury securities after Japan, China's massive sell-off of United States bonds has raised concerns among some economists. They warn that this significant divestment could potentially unsettle the Treasury market and lead to an increase in United States borrowing costs, further complicating the economic landscape amid ongoing geopolitical tensions.

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