China trimmed its holdings of US Treasuries in November to the lowest level since 2008, diverging from a global trend that saw total foreign ownership of the debt instruments hit a record high.
Analysts say the prospect of a politicised Federal Reserve chairmanship under Donald Trump’s presidency has deepened Beijing’s concerns over its exposure to American debt, with more cuts expected.
Beijing’s stockpile fell to US$682.6 billion in November, down from US$688.7 billion in October, according to US Treasury Department data released on Thursday.
That marks the lowest level since September 2008 and a nearly 10 per cent drop since last January, according to financial data provider Wind.
Shao Yu, chief economist with the Sci-tech Innovation Management Research Centre at Fudan University, said Beijing appeared set to keep reducing its stockpile amid the growing risk of US debt unsustainability.
“The massive accumulation of debt resembles a Ponzi scheme, where larger volumes of new debt are used to replace the old. China doesn’t want to play this game any more,” he said.
China’s reduction also comes amid heightened uncertainty over the future of the Federal Reserve, whose independence has come under threat during the Trump administration.