China sells more of its US debt in February: Treasury

Updated: 2014-04-16 11:32

By Amy He in New York (China Daily USA)

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China, the largest holder of US debt, sold some of those securities in February, according to new data released by the US Treasury Department.

China's holdings for February totaled $1.272 trillion, down from $1.275 trillion in January. The country acquired a record amount of US treasuries in November of last year, and has since sold US debt almost every month since.

Japan, the second largest US debt holder, picked up an additional $9.1 billion in February, bringing its total to $1.21 trillion.

Based on data released by the People's Bank of China (PBOC) or activity through March, China's foreign exchange reserves hit an all-time high of $3.95 trillion, increasing about $100 billion.

"Some senior officials have been claiming that the move down in the renminbi (RMB) recently was driven by the economic slowdown and the drop in the trade balance, but that doesn't explain the Q1 bounce in foreign-exchange reserves," said Kent Troutman, research analyst at the Peterson Institute.

Troutman said that the central bank was potentially facing appreciation pressures from the country's financial channels, so intervention was needed to "thwart those pressures", though a few more months' worth of data is needed for a sign of whether the central bank has reached a turning point in intervention policy.

Joseph Gagnon, senior fellow at the Peterson Institute, said that China's capital flows are getting more "volatile", but that ultimately, "a reduction early this year would not be surprising and would not say much about the future".

"However, the PBOC decided to push the renminbi down late in February and into March, so it must have purchased a lot of foreign-exchange reserves in late February and March," he said. "Some of these may eventually show up in US Treasuries, so March may see an increase."

Foreign purchases of US Treasuries hit a record high in February, totaling $5.89 trillion, up from $5.84 trillion in January, most likely due to tension between Russia and the West, analysts said.

The "strong inflows may have been the result of de-risking flows following the beginning of escalation in the Crimean region, with US investors similarly shedding $1 billion in foreign assets during the month, consistent with a risk-off tone," wrote Gennadiy Goldberg, interest-rate strategist with TD Securities, in a note.

"Private investors purchased $75.9 billion in Treasuries during the month as official accounts purchased $16.6 billion, leading to the strongest month of Treasury purchases since the post-US downgrade uncertainty of September 2011," he wrote.

The total of all net foreign acquisitions of long-term securities, short-term US securities, and banking flows was $167.7 billion, the Treasury said.

Foreigners purchased $76.5 billion in long-term securities, after selling a revised $2.1 billion in January. The department said that there was $85.7 billion of long-term capital inflow in February.

(China Daily USA 04/16/2014 page1)