Is China throwing US government bonds onto the market on a massive scale, let`s say as “revenge” or an instrument in the trade war with the USA? The US imports much, much more from China than vice versa. This means that the US can levy tariffs on more trade than the Chinese. So China would have to look for alternatives to meet the Americans.
There would be the gigantic amount of US government bonds held by China as an instrument of pressure. Selling large quantities of them quickly on the free bond market would cause turbulence on the markets. But financial experts are relatively unanimous that China will not choose this instrument. But are the Chinese already doing it? Not quickly selling large quantities at once, but gradually selling small quantities month after month?
Changes in ownership of US government bonds
The March data officially released tonight by the US Treasury shows that China has at least officially sold $10.4 billion worth of US Treasury bonds (net). China’s official holdings were $1,1205 trillion up from $1,1309 trillion in February (currently the lowest in two years).
Year-on-year from March 2018 to March 2019 the volume fell by 68 billion dollars from 1188 to 1,1205 trillion dollars. In the course of last year (chart) you can see: Every month it went a little downwards and on a yearly basis you can already see a clear decline. In the first few months of 2019 the volume even increased slightly and we are currently experiencing the first decline since November 2018.
You always have to consider the following: It is difficult to see whether and what volumes countries such as Russia or China hold via custodians in third countries such as Belgium or the Caymans. In financial circles it is an open secret that governments make their ownership more difficult for the public to recognise. According to the official list the Cayman Islands are the eighth largest holder of US government bonds! There the volume held increased by 53 billion dollars in the last 12 months. In Belgium the volume held grew by 60 billion dollars in the last 12 months.