Calls for China to cut US Treasuries persist despite 14-year low
- A former central bank adviser has said China must continue to dump its holdings to mitigate political risk and ‘smoothen’ trade relations with US
- China joins other central banks in reducing dollar-denominated assets to avoid fallout from the Fed’s historic hikes
A former adviser to China’s central bank has said the country has “too many” US Treasury bills, even as its holdings have been trimmed to a 14-year low.
The comments from Yu Yongding, an outspoken economist at the Chinese Academy of Social Sciences, came as a growing number of academics and advisers openly express worries about the safety of China’s overseas assets.
Instead of accumulating US dollars through its massive export machine and investing them back via low-return US Treasuries, Yu said emphasis must be shifted to imports as the country now turns to domestic circulations – consumer spending, construction and home-grown technologies – for future growth.
This will also “smoothen” the country’s trade with the United States, he said during a panel discussion at Friday’s Bund Summit in Shanghai.
Dumping US Treasuries is one of the arrows speculated to be in Beijing’s quiver in the event financial sanctions from Washington demand retaliatory action. Denial of access to international payment messaging system Swift and the US dollar, meanwhile, are some of the weapons believed to be in the US arsenal.
China has joined many central banks in offloading US government debt since the US Federal Reserve embarked on steep interest-rate hikes to tame inflation in March 2022.
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