China’s May holdings of US Treasuries dip for the third straight month to a two-year low amid trade war woes
- China’s holdings of US Treasuries including notes, bills and bonds fell by US$2.8 billion in May to US$1.11 trillion
- The dip in May was the third consecutive month of declines, leaving China’s holdings at the smallest since May 2017
China’s holdings of US Treasuries dipped in May to the lowest in two years amid an escalation of the trade war between the world’s two largest economies.
The Asian nation’s pile of notes, bills and bonds fell by US$2.8 billion to US$1.11 trillion, according to Treasury Department data released Tuesday in Washington. It was the third straight month of declines and left the nation’s holdings the smallest since May 2017.
China remained the US’s biggest foreign creditor. Japan was next, with US$1.1 trillion, up by US$37 billion from a month earlier, which was the biggest gain since 2013. The US$9.2 billion gap between the two nations’ holdings was also the smallest since Japan was last the largest US foreign creditor two years ago.
Overall, US Treasury holdings by foreigners hit a new high, rising to US$6.54 trillion. The previous record of US$6.47 trillion was hit in March.
US-China trade tensions have cooled since May, when negotiations collapsed and the Trump administration more than doubled punitive duties on US$200 billion of Chinese goods. The two sides have since agreed to restart talks and hold off on new tariffs to allow more time for a negotiated solution to end their year-long trade war.
The worsening US-China trade tensions saw the offshore yuan plunge roughly 2.9 per cent in May. The fallout drove the exchange rate back towards the closely watched level of 7 per dollar, a level not seen since the financial crisis.
