China surpasses Japan to become biggest U.S. creditor

Bruno Cirelli
Agosto 16, 2017

Japan, which overtook China as the largest holder of USA treasuries last October, cut its holdings by 20.5 billion dollars to 1.0908 trillion dollars in June.

China increased its amount of bonds by US$44.3bn in June while Japan decreased theirs by US$20.5bn to US$1.09tn.

Similarly, China's foreign exchange reserves totaled $3,080.7 billion as of the end of July, up $23.9 billion from a month earlier for the sixth straight month of increase, according to Chinese central bank data released earlier this month.

China and Japan together make up for over a third of overall foreign holdings of US Treasuries. The dollar bought 6.68 yuan on Tuesday, compared with 6.90 yuan back in May.

The recent increase in Treasury holdings possibly also reflects an incentive to buy US-dollar denominated assets amid rising USA interest rates. It is also expected that China's USA holding would continue to rise in future months. Now it has sold 20.5 billion USA dollars and has 1.09 trillion U.S. dollar treasuries. "The trade flows are going to create more demand for Treasuries".

While there was speculation in recent years that China would use its massive Treasuries holdings to exert pressure on the United States, there has been little indication of that happening, even amid rising tensions between the two countries on issues ranging from trade to North Korea. The last time China was the top holder was back in last October.

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