China May Dump U.S. Treasuries As Sino-U.S. Tensions Flare

China may gradually cut its holdings of U.S. Treasury bonds and notes, in light of rising tensions between Beijing and Washington, state-backed newspaper Global Times cited experts as saying. With Sino-U.S. relations deteriorating over various issues including coronavirus, trade and technology, global financial markets are increasingly worried if China would sell the U.S. government debt it holds as a weapon to counter rising U.S. pressure.

“China will gradually decrease its holdings of U.S. debt to about $800 billion under normal circumstances,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, was quoted as saying on Thursday, without giving a detailed timeframe. “But of course, China might sell all of its U.S. bonds in an extreme case, like a military conflict.”

China, the second largest non-U.S. holder of Treasuries, held $1.074 trillion in June, down from $1.083 trillion the previous month, according to latest official data. China has steadily decreased its holdings of the U.S. bonds this year, although some market watchers suspect China may not have necessarily sold U.S. Treasuries as it may have used other custodians to purchase Treasuries. -Full Report

China may ditch US Treasuries as decoupling risk looms