Chinese holdings of US Treasuries dip in January amid capital flight

Data adds to evidence China continues to struggle with capital flight

PUBLISHED : Thursday, 16 March, 2017, 10:22am
UPDATED : Thursday, 16 March, 2017, 10:22am

China’s holdings of US Treasuries have declined as the world’s second-largest economy uses its foreign-exchange reserves to support the yuan. Japan, America’s largest foreign creditor, increased its holdings for the first month in six.

A monthly Treasury Department report released in Washington on Wednesday showed China held US$1.05 trillion in US government bonds, notes and bills in January, down US$7.3 billion from December. The selling may be more severe than the data suggested, as the tally of Belgium, which analysts say is home to Chinese custodial accounts, dropped US$8.2 billion to US$112 billion, the lowest since August 2015.

China’s holdings of US treasuries sink in 2016 to prop up yuan

The latest data added to evidence that China’s central bank continues to grapple with capital flight even though officials guided the yuan higher early this year. China’s foreign-exchange reserves, where the bonds are kept, dipped to US$2.998 trillion in January, before nudging back above the US$3 trillion mark in February and halting a seven-month losing streak. China’s reserves are near a six-year low, shrinking from a peak of US$4 trillion in 2014 as policymakers sold dollars to support the Chinese currency.

Japan’s portfolio rose in January, increasing by US$11.7 billion to US$1.1 trillion, according to the data. Japan overtook China as the largest foreign holder of US Treasuries last year.

The report, which also contains data on international capital flows, showed net foreign inflows of long-term securities totaling US$6.3 billion in January. It showed a total cross-border buying, including short-term securities such as Treasury bills and stock swaps, of US$110.4 billion.