China’s US debt holdings slip to lower levels

Washington: Even though it continued to retain its top slot as the biggest holder of American government debt, China has also been shaving off its holdings over a period of time bringing it down to its lowest level over the previous nine months. For the month of February, China's holdings were down $11.5 billion at $877.5 billion as compared to January.

The slip marked the fourth consecutive monthly drop in Beijing's holdings of US government bonds and also marked the lowest level since June last year, when it held $915.8 billion.

Yet, China remains far ahead of Japan, the next largest holder of US bonds with $768.5 billion, and third-placed Britain at $231.7 billion, according to the US government's Treasury Department's latest figures on international capital flows.

Beijing's moves in this regard may be seen in the light of recent sustained pressure from the international community, primarily the United States, to revalue its currency, which, as is commonly acknowledged, is manipulated by Beijing to provide unfair advantage to its export sector. This advantage has led to Beijing amassing more than two trillion dollars in foreign exchange reserves and, in the process, also become the largest holder of US government debt.

But Treasury data in this regard is not as reliable as may appear at first glance, for it fails to take into account latest positions as they prevail across the world markets. US bonds are also bought at foreign markets and it takes a certain amount of time for it to collate all the data. Such reports may, at best, be considered to be interim ones.

Early this February, Treasury data created a quite a rumpus in the markets when it contended that China's holdings of US debt were now second largest behind that of Japan. Even as the markets were trying to absorb the fact  that China had indeed begin the process of dumping US debt came a correction ten days later that revealed significant purchases in the London markets by China-linked entities. Beijing reclaimed its top position as the holder of US debt in a little more than a week.