Bloomberg News reports that China is selling billions of dollars of its massive inventory of U.S. Treasuries to raise dollars to buy back and stabilize the country’s own currency. The move comes amid a sharp decline in Chinese stocks in recent months and rising concerns about China’s slowing economic growth.
For years, China’s appetite for Treasuries has helped the U.S. government cover its bills. Recently, for example, that helped fund the nearly $1 trillion recovery plan Congress implemented after the 2008 financial crisis. For its part, China uses that debt to anchor its own balance sheet and to insulate itself from global economic shocks.
Chinese demand for U.S. sovereign debt has only grown in recent years. In 2007, China held $388 billion in Treasuries, which at the time ranked the People’s Republic behind Japan. But as of June, China’s hoard of American debt had more than tripled to $1.271 trillion, according to the Congressional Research Service, the biggest position held by any nation and a substantial portion of the $6.175 trillion of Treasuries held overseas.
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