Summary by Bloomberg AI
- China directly held $760 billion of US Treasuries as of January, around 9% of such debt held by foreigners.
- China’s demand for US Treasuries will diminish over time, but it is unlikely to rush to exit now.
- China has probably suffered mark-to-market losses on its Treasury holdings in the recent market turbulence, estimated to be $15 billion to $30 billion.
By Chang Shu (Economist) and David Qu (Economist)
04/15/2025 15:38:37 [BI]
(Bloomberg Economics) — A clear, accurate and up-to-date picture of China’s holdings of US Treasuries is beyond our grasp. Were sales by China behind the recent volatility? The market swiftly dismissed such speculation. We see nothing for China to gain by spooking the market. Pushing back against US tariffs on other fronts makes sense. Driving down the value of a major store of China’s savings doesn’t. China’s demand for US Treasuries will diminish over time. But we doubt it is rushing to exit now.
- China directly held $760 billion of US Treasuries as of January, around 9% of such debt held by foreigners, according to the data from the Treasury International Capital (TIC) System.
- The TIC data cover portfolio holdings and flows between the US and other countries — providing a starting point for understanding China’s holdings of US debt. But they don’t capture indirect holdings through third parties — so China’s Treasury holdings could be even larger.
- January data don’t shed light on market moves that occurred in the first half of April. Putting aside the murkiness of the situation, we consider the incentives. Does it make sense for China to sell down some of its Treasuries when markets are already jittery? We don’t think so — even small sales would risk hefty mark-to-market losses in the current environment.
- What’s more, China would risk undermining the dollar — putting upward pressure on the yuan. That would run counter to the need now to keep the currency soft to cushion the impact of elevated US tariffs.