China's US Treasury Holdings Hit 12-Year Low Due to "Interest Rate Hikes and Conflicts"

[Asia Economy Reporter Ki-min Lee] China's holdings of U.S. Treasury securities have declined for seven consecutive months, reaching the lowest level in 12 years.

According to data released by the U.S. Department of the Treasury on the 15th (local time), as of June, China's holdings of U.S. Treasuries stood at $967.8 billion (approximately 1,268.8 trillion KRW), down $13 billion (about 1.743 trillion KRW) from the previous month.

Chinese media such as Pengpai News reported that China's U.S. Treasury holdings have decreased for seven consecutive months, hitting the lowest point in 12 years. In May, the holdings were $980.8 billion (about 1,285.8 trillion KRW), falling below $1 trillion for the first time since May 2010.

The decline in China's U.S. Treasury holdings is analyzed to be due to the Federal Reserve's interest rate hikes, which caused bond prices to fall inversely to interest rates, resulting in larger valuation losses, as well as tensions between the U.S. and China prompting China to reduce its holdings.

Wang Yongzhong, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said, "In the past, U.S. Treasuries were considered high-quality safe assets, but perceptions changed after the U.S. froze Russian assets related to Russia's invasion of Ukraine," adding, "Due to concerns that China's U.S. Treasury holdings could be frozen if U.S.-China conflicts escalate, China has reduced its holdings."

Meanwhile, foreign investors' holdings of U.S. Treasuries in June increased by $5.1 billion (about 668 billion KRW) from the previous month to $7.43 trillion (approximately 9,800 trillion KRW).

Japan's holdings rose by $12.6 billion (about 1.65 trillion KRW) from the previous month to $1.2363 trillion (approximately 1,621.4 trillion KRW), maintaining its position as the world's largest holder.