According to the latest data from the US Department of the Treasury, the Chinese government sold a total of $53.3 billion in US Treasuries and institution bonds in the first quarter, setting a historic record. Belgium, typically seen as the custodian country of Chinese government bonds, disposed of $22 billion in US Treasuries during this period.
This move indicates that amid the ongoing trade tensions between the US and China, this communist regime is moving away from US assets and seeking diversified investments.
There are increasing signs that the tense relationship between the world’s two largest economies may further deteriorate. US President Joe Biden has announced tariffs on a range of Chinese imports, while his predecessor Donald Trump has hinted at imposing tariffs exceeding 60% on Chinese goods if re-elected.
Against this backdrop, investors will pay closer attention to China’s investment trends in the US.
Stephen Chiu, Chief Asia Foreign Exchange and Interest Rate Strategist at Bloomberg Intelligence, said, “We are getting closer to a rate cut cycle by the Federal Reserve, but China is still selling these two currencies, with the obvious intention of diversification.” He added, “As the US-China trade war reignites, China’s pace of selling US securities may accelerate,” especially if Trump returns to the presidency.
As China sells off US dollar assets, the share of gold in its national official reserves is rising. In April, the proportion of precious metals in reserves climbed to 4.9%, the highest level in central bank data since 2015.
Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), said in a speech this month that since 2015, China and countries closely linked to China have increased their gold holdings in foreign exchange reserves, while the US and other major economies have largely maintained stability in this regard. She noted, “This indicates that central banks of some countries may be purchasing gold out of concerns about sanction risks.”