China's US bond holdings hits two-year low

Business | Reuters 18 Jul 2019

China trimmed its ownership of United States bonds to a two-year low, while Japan increased its holdings of US Treasuries to its highest level in nearly two years in May, data from the US Treasury Department showed.

China's stake in US Treasuries declined for a third consecutive month to US$1.110 trillion (HK$8.66 trillion), the lowest since May 2017 and down from US$1.113 trillion the month before.

China's Treasuries holdings have been in focus amid speculation whether Beijing may retaliate against US President Donald Trump's threat of increasing tariffs on Chinese goods.

Japan's holdings of US government debt jumped to US$1.101 trillion in May, a level not seen since August 2017 and up from US$1.064 trillion in April.

Trump yesterday said the United States still has a long way to go to conclude a trade deal with China but could impose tariffs on an additional US$325 billion worth of Chinese goods if it needed to do so.

In another twist, the United States did not fully comply with a World Trade Organization ruling and could face Chinese sanctions if it does not remove certain tariffs that break WTO rules, a WTO's appeals judges said in a ruling.

The office of US Trade Representative Robert Lighthizer said the WTO ruling recognized that the United States had proved that China used state-owned enterprises to subsidize and distort its economy.

But the ruling also said the United States must accept Chinese prices to measure subsidies, even though USTR viewed those prices as "distorted".

In other news, members of the US Senate and House of Representatives introduced bills to keep tight restrictions on Huawei Technologies, amid concern about Trump's easing of curbs on the Chinese firm.

The legislation would among other things bar the removal of the massive telecommunications equipment firm from a Commerce Department trade blacklist without House and Senate approval, and let Congress disallow waivers granted to US companies doing business with the company.

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