As China diminishes its US Treasury holdings and bolsters gold reserves, questions arise over US borrowing sustainability.
Key Points:
- China sheds $22.7 billion in US Treasuries in February, reducing total holdings to $775 billion.
- Trend suggests UK may surpass China as second-largest foreign US debt holder.
- Japan remains top foreign US creditor with $1.17 trillion in Treasuries.
- Chinese divestment in US debt ongoing, with holdings declining from $1.1 trillion in 2021.
- Concurrently, Chinese gold trading activity surges, with first-quarter consumption and imports rising.
- State-backed China Gold Association reports 5.94% increase in gold consumption and 78% surge in gold raw material imports.
- China’s US Treasury holdings reach 15-year low amid heightened gold accumulation.
Potential Implications:
- Concerns mount over reliance on foreign creditors to fund US debt amid shifting dynamics.
- Increased gold reserves signal potential diversification away from US dollar assets.
- Uncertainty surrounds impact on US bond market and borrowing costs in light of reduced demand.
- Need for vigilance in monitoring global economic trends and their implications for US fiscal stability.
Sources:
www.fxstreet.com/analysis/china-is-dumping-us-treasuries-and-buying-gold-202404212302
Chinese gold trading activity has been exploding! pic.twitter.com/iZ2Aw2isGS
— Longview Economics (@Lvieweconomics) April 26, 2024
Gold consumption in #China rose 5.94% from a year earlier to 308.91 tons in the first quarter, the state-backed China Gold Association said Friday. Meanwhile, China’s imports of gold raw materials surged 78% in the same period, helping the country’s total gold output to jump…
— Giovanni Staunovo🛢 (@staunovo) April 26, 2024
China's U.S. Treasury holdings have fallen to their lowest level in 15 years 🚨 pic.twitter.com/eapCrAJRVm
— Barchart (@Barchart) April 26, 2024