China’s Ongoing Exodus from US Treasuries: A Signal of Economic Stress

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China’s relentless reduction in its holdings of US Treasuries continues, marking a $300 billion decline since 2021. Presently, China holds just under $800 billion of US Treasuries, a level not seen since 2009. This strategic move may be attributed to multiple factors, primarily driven by China’s need for liquidity amid economic challenges and an impending recession.

As interest rates reach their peak, the foreign private sector has slowed its purchases of US Treasuries. China’s decision to decrease its holdings signals an effort to address liquidity requirements during a period of economic uncertainty. With China potentially entering a recession and grappling with economic headwinds, the trend of reducing US Treasury holdings might persist.

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This move raises concerns about how China will manage its economic crisis, as the country may require more liquidity to navigate through the challenges. The ongoing reduction in US Treasury holdings by China hints at the possibility of further selling, and the economic implications may extend beyond the financial markets.

Moreover, the Chinese stock market has experienced negative returns over the past decade, with India and the United States significantly outperforming. The combination of these factors suggests a complex economic landscape for China, with potential repercussions for global financial dynamics.

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