China reduced its stockpile of US Treasuries to a 16-year low in April, as an escalating trade war with Washington sparked concerns about the long-standing status of American government bonds as the world’s safest asset.
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Beijing’s holdings dropped to US$757 billion, down US$8.2 billion from March, according to the latest data released by the US Treasury Department. The figures for April marked the second consecutive month of decline and the lowest level since March 2009, according to data compiled by Wind.
Having already slipped to the No. 3 position among foreign holders in March – behind Japan and the United Kingdom – China continued its steady retreat from US government debt, a trend that began during Trump’s first term.
On April 2, dubbed “Liberation Day”, Trump launched sweeping “reciprocal tariffs” on allies and adversaries alike. The move sparked turmoil in global markets, sending US stocks tumbling and triggering sharp sell-offs in both Treasuries and the dollar.
Tit-for-tat tariff exchanges between the US and China quickly escalated, with duties on both sides reaching over 100 per cent before a temporary ceasefire agreed in May rolled back most of the levies.
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There was concern that the trade war between the world’s two largest economies would spill over into financial markets, with speculation that Beijing could dump its vast holdings of US Treasury securities and that Washington could delist Chinese companies from American stock exchanges.
Given the rising tensions between the two superpowers, Chinese economists have cautioned against the weaponisation of the US dollar amid fears that Washington could one day seize Chinese overseas financial assets – similar to the actions taken against Russia following its invasion of Ukraine.