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China is Selling US Treasuries to Support Yuan

China is rapidly selling the US Treasuries in order to support yuan. According to November data, Chinese stock of US Treasuries was reduced by $66 billion in November, $194 billion in the previous 6 month and $215 billion in the previous year. Those are record changes in US Treasury holdings, leaving China, the long time largest holder of US Treasury debt on the second place after Japan.

Reuters reports:

China’s holdings of U.S. Treasuries declined for a sixth straight month in November, as the world’s second largest economy continued to dip into its reserves to prop up a weakening yuan and stem capital flows.

China’s holdings declined to $1.049 trillion, a drop of about $66 billion, data from the U.S. Treasury Department showed on Wednesday. November’s drop in China’s holdings was the largest since December 2011’s record fall of $102.7 billion.

“This is in line, at the very least, with data showing that capital continued to flow out of China,” said Gennadiy Goldberg, interest rates strategist, at TD Securities in New York.

“Perhaps this does suggest that there is further pressure on the Chinese central bank to sell Treasuries to raise cash in order to meet those capital outflows,” he added.

China’s yuan currency had weakened around 4 percent against the dollar in October and November.

This is the clear sign, that significant capital flight from China continues despite the restrictive measures.

 
See also:

China’s Holdings of U.S. Treasuries Drop by Most Since 2011

UPDATE 1-China’s U.S. Treasury debt holdings fall for 6th month

China’s U.S. Treasuries holding reduction not a strategic cut: FX regulatory official