China is selling US government debt

Getty Images.

Chinese holdings of US government debt fell to a ten-month low in December.

According to the US treasury department, US government debt held by China – the largest offshore holder globally – fell by $18.4 billion to $1.25 trillion in December, leaving the holdings of bills, notes and bonds largely unchanged from the levels of a year earlier.

The tweet below from ANZ’s senior interest rate strategist Martin Whetton reveals the movements in US debt holdings by individual nation in December.

US debt held by Belgium – rumored to be an offshore agent for Chinese foreign debt holdings – fell by an even larger $22 billion, suggesting that the official reduction through direct Chinese selling may have been substantially larger than the $18.4 billion figure recorded.

The news fits with the recent sharp reduction in Chinese FX reserves, something that many have put down to China actively intervening in the FX market to support the renminbi.

In December China’s official FX reserves fell by $107.9 billion to $3.33 trillion, the largest one-month decline on record. Over the year they declined by $582.5 billion, also the largest calendar year decline on record.

Given Chinese reserves fell by an additional $99.5 billion in January, its likely that the recent rundown in China’s US debt holdings will continue when the January figures are released in March.

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