China has massively reduced its holdings of US Treasuries in the last two weeks. Beijing informed the US government about the sales, but has not indicated the exact scope of the disposals, DWN reported.
This step is reportedly designed to help China to stabilize its financial market.
On August 11, China started to devalue the national currency and sell US Treasuries to support the devaluation.
“The central bank will frequently intervene in the foreign-exchange market in the next three months as it needs to ensure the currency is stable,” a representative of Citigroup Inc. in Hong Kong said, as cited by Bloomberg.
At the same time, China's currency policy is increasingly becoming a problem for the US. The massive sales of the US government bonds could significantly reduce the gain on the disposal of investments in the United States.
“Bear in mind here that thanks to the threat of a looming Fed rate hike and a litany of other factors including plunging commodity prices and idiosyncratic political risks, EM currencies are in free fall which means that it's not just China that's in the process of liquidating USD assets,” Zero Hedge wrote.