China cut its holdings of U.S. government debt by 36.5 billion U.S. dollars in August, which was the first decrease after four consecutive months of increases and also the biggest one-month decline in recent years, according to statistics issued by the U.S. Treasury this week. China now holds more 1.1 trillion U.S. dollars of U.S. government debt.
"Over the past few months, U.S. Treasury yields have been steadily dropping, and Treasury prices have been rising. Given the relatively good prices, it is reasonable and efficient for China to sell part of its U.S. dollar assets," said Ding Zhijie, a professor at the School of Banking and Finance under the University of International Business and Economics.
Yuan Gangming, an expert on international finance at the Chinese Academy of Social Sciences, said that the central banks of major economies have all been reducing their holdings of U.S. government debt in recent weeks.
However, Yuan said China's reduction in its U.S. debt holdings is just a minor adjustment to its foreign exchange reserves. There are no signs that China is reducing its holdings of U.S. debt in a systematic and steady way, he said.
Worried about safety of dollar assets?
Certain experts said that the reduction in U.S. debt holdings has reflected China's foreign exchange regulator's worries about the long-term depreciation of the U.S. dollar and its eagerness to get out of the "dollar trap."
"U.S. dollar assets make up nearly 70 percent of China's 3.2 trillion U.S. dollars of foreign exchange reserves, and the European and U.S. debt crises have exposed the risks of such an imbalanced reserves structure. China is 'kidnapped' by U.S. debt and needs to change the situation as soon as possible," Yuan said.
