- China reduced US debt by 9% between the end of 2021 and July this year, according to Nikkei Asia.
- Meanwhile, the Cayman Islands saw a $38.5 billion increase in Chinese treasury holdings and Bermuda a $7 billion increase.
- China may be protecting dollar-denominated assets from any future sanctions like the one that froze Russia’s foreign currencies.
China has steadily reduced its holdings of US government debt this year and moved some bonds to offshore tax havens where they could be protected from any future sanctions, according to a Nikkei Asia report.
Treasury Department data last week showed Beijing’s holdings of US Treasuries reached $970 billion in July. While that’s up from $967.8 billion in June, which was the lowest since May 2010, the overall trend is down. Year-to-date to July, China’s treasury bond reserve is down 9%.
Meanwhile, Chinese Treasury holdings located in the Cayman Islands and Bermuda jumped by $38.5 billion and $7 billion, respectively.
Moving them overseas could protect Chinese dollar-denominated assets from the potential of future sanctions, such as those that froze Russia’s foreign currency reserves, Nikkei said.
After Russia invaded Ukraine earlier this year, more than $300 billion in Russian assets held in sanctioning countries were frozen.
A Chinese government source told Nikkei that Russia’s asset freeze “dealt a much bigger blow” than Moscow’s expulsion from the SWIFT global payments system. And any attempt to reunite Taiwan with mainland China by force could trigger similar sanctions that would jeopardize Beijing’s $3 trillion in foreign currency reserves.
And while its Treasury holdings are falling, China’s gold imports more than doubled in August year-on-year to $10.36 billion, according to Nikkei.