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US debt holdings increase in August

By Cai Xiao | China Daily | Updated: 2017-10-19 07:18

China's holdings of US treasuries rose for a third consecutive month in August to the highest in a year on the back of rising foreign exchange reserves and expectations that the greenback may appreciate further.

The country's total holdings of US bonds, notes and bills rose by $34.5 billion on a monthly basis in August to $1.2 trillion, according to data from the US Treasury Department on Tuesday.

Japan, which overtook China as the largest holder of US treasuries last October, cut its holdings by $11.4 billion to $1.1 trillion in August.

"China has continued to increase its holdings of US treasuries as it had a trade surplus and forex reserves were increasing," said Deng Haiqing, chief economist of JZ Securities, adding that other factors like a weaker euro had also prompted the purchases.

China's foreign exchange reserves rose to their highest level so far this year in September to $3.11 trillion, marking a growth for the eighth straight month.

Cross-border capital flows and the foreign exchange market's supply-demand situation were generally balanced, while the rise in asset prices in global financial markets has pushed the growth in foreign exchange reserves, a statement from the State Administration of Foreign Exchange said in September.

In January, China's forex reserves plunged below $3 trillion, but with economy moving on to a firmer footing and the yuan stabilizing, the stockpile has increased steadily since February.

Ding Shuang, an economist with Standard Chartered, said higher holdings of US treasuries can be profitable for China as the US currency is expected to rebound by the end of this year.

By the end of August, overall foreign holdings of US Treasury securities rose to $6.27 trillion from July's $6.25 trillion. Data also showed that foreigners bought US Treasuries to the tune of $11.49 billion in August, after selling $490 million in July.

Yields on the benchmark 10-year US Treasury notes at the beginning of August were 2.25 percent and ended the month at 2.12 percent.

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