Beijing unloads US Treasuries in hot times

Business | Reuters 17 May 2019

China sold the most US Treasuries in almost 2-1/2 years in March amid uncertainty about a trade deal between Beijing and Washington.

Just-released data from the US Treasury Department shows Beijing selling US$20.4 billion (HK$158.7 billion) in Treasuries in March - the most since October 2016 - following US$1.08 billion in purchases in February.

China's stake in Treasuries fell for the first time in four months to US$1.12 trillion in March, which was the lowest since May 2017 when it was US$1.10 trillion. It was US$1.13 trillion in February.

Since last week and after a dismal 10-year Treasury auction there has been renewed speculation whether China may sell US debt in retaliation for increased tariffs on US$200 billion of its exports to the United States.

The latest data on Beijing's US bond holdings were collected before a sudden breakdown in trade talks between the world's two biggest economic powers 1-1/2 weeks ago and prior to the duty hike on Chinese goods that went into effect on Friday.

"The decline this month brings China essentially flat to where they were in February, erasing the increases from December through February," Jefferies' senior money market economist, Tom Simons, wrote in a research note.

Despite the drop in Treasuries holdings, China remains the largest US creditor.

Meanwhile, China's foreign direct investment in April expanded 6.3 percent year on year to 62.9 billion yuan (HK$71.7 billion).

China's new home prices in April rose 0.6 percent from a month earlier, unchanged from the pace of growth in March, calculated from National Bureau of Statistics data published yesterday.From a year earlier, average new home prices in 70 major cities increased 10.7 percent in April, up from 10.6 percent growth a month earlier.

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