Commentary
One of the recent news warnings about the status of the U.S. dollar was the continuing slash of U.S. Treasury securities holdings by mainland China. It’s latest holding in January was US$859.4 billion, a year-over-year drop of 17 percent compared with that of US$1,033.8 billion in January 2022. Seventeen percent is undoubtedly a significant decline compared to the overall total of 3.3 percent fall. Yet there are reasons justifying this: China exports fell by ten percent at the end of end-2022, with foreign sell-off of China sovereign bonds and other outflows, that 17 percent was explainable.
Regardless of the reasons behind it, did China’s reduction of U.S. Treasury securities impact the total amount? From the accompanying chart, one can see the answer is a crystal clear “No.” Since 2014, not long after Xi became the leader, China has been underweighting U.S. Treasury securities. But an interesting observation is that such a downtrend is linear in most of the early years and then declines more quickly since 2021. To those familiar with China’s data, this is precisely the trend of GDP growth so the story can go without conspiracy….