China’s Increased Holding of US Treasuries is Purely Market Behavior: ExpertCC BY 2.0 / Roman Boed / The US Treasury DepartmentBusiness03:24 13.10.2017(updated 02:42 13.10.2017) Get short URL121401
An expert says that China’s increased holding of US Treasuries is purely market behavior against the backdrop of its external surplus and increasing foreign reserves, People’s Daily Overseas Edition reported on Oct. 9.
China’s holdings of US Treasuries were valued at $1.17 trillion by July after the country increased its holding for six consecutive months to become the largest foreign holder of US Treasuries, according to statistics recently released by the US Treasury Department.
Chinese authorities say that the US Treasury market is crucial for China, and both increasing and reducing holdings is normal market behavior.
China’s increased holding of US Treasuries is a reasonable choice, as China’s trade surplus continued to expand and its foreign reserves rose this year, said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges.
The expert added that US Treasuries are an important choice for China in terms of foreign investment, as it has both safety and liquidity compared with other security assets.
In addition, experts are making a bullish bet that the US dollar could get rid of its weakness in the second half of 2017.
Zhang noted that the US dollar is expected to increase in value after undergoing depreciation since this year. Therefore, purchasing dollar-based assets at a relatively low price point now could bring profits later.
While investment behavior is influenced by many factors, China will still choose to slightly increase its holding of US Treasuries if its trade surplus continues to expand, the expert added.