China cut US debt holding amid ‘risk of possible conflict’

China’s holdings of US Treasuries fell from US$1.003 trillion in April to US$980.8 billion in May, the lowest since 2010

US is dealing with high inflation, while strained bilateral ties between China and the US over trade, technology and Russia have also contributed

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China’s holdings of US treasuries fell from US$1.003 trillion in April to US$980.8 billion in May, according to US Department of the Treasury on Monday. Photo: EPA-EFE

Published: 12:00am, 20 Jul 2022Updated: 1:57am, 20 Jul 2022

A desire by Beijing to avoid “the risk of possible conflict” with Washington could have contributed to China cutting its holding of US government debt to below US$1 trillion for the first time in over 12 years, analysts said.

China’s holdings of US Treasuries fell from US$1.003 trillion in April to US$980.8 billion in May, according to the US Department of the Treasury, representing the lowest point since May 2010 when its holdings stood at US$843.7 billion.

The US is dealing with its highest level of inflation in 40 years, while strained bilateral ties between China and the US over trade, technology and Russia have also contributed to the concerns.

Hong Kong also slashed its holdings from US$195.4 billion in May to US$186.6 billion last month.

The large holdings in the past were due to the good bilateral ties, but now China needs to avoid the risk of a possible conflict with the United States

Tan Yaling

“It’s essentially a matter of China-US relations,” said Tan Yaling, head of the Beijing-based China Forex Investment Research Institute.

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