The Truth About China's Increase In Treasury Buying

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In May China increased its holdings of U.S. Treasuries for the second month in a row.Via Shanghai Daily:

China boosted its holdings by US$7.3 billion to US$1.16 trillion, the Treasury Department said yesterday.
Total foreign holdings of Treasury securities rose 0.6 per cent to US$4.51 trillion.

You don’t hear about this much, because typically the media focuses on China when it sells Treasuries, because that makes for good headlines.

So does it mean that China is suddenly a firm believe in US dollar assets?

Not really. All these movements are overblown.

China owns Treasuries because it has a huge trade surplus with the US, and needs to recycle its dollar earnings. The trade deficit is growing again. That alone could probably explain a lot of this.

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