Treasury Action: is China weaponizing its Treasury holdings?
Treasury Action: is China weaponizing its Treasury holdings? That's a recurring question, but it's more in focus now with the escalation of U.S.-Sino trade tensions, and given the information from the Treasury capital flows report from May 15. That report (two months in arrears) showed China sold $20.45 B in notes and bonds in March. That was the largest monthly dump since October 2016. And total holdings (including bills) declined to $1,1205 B, from $1,130.9 B. Adding to the speculation that China may be trying fight back in this way against U.S. tariffs, it has sold coupons in 9 of the last 12 months (ending March) for a total of $99.7 B. Indeed, while capital moves back and forth for many reasons, this trend, and especially the degree of liquidation in March, is suspicious. Analysts still don't believe this is a viable long term strategy, however. It's not clear it will hurt the U.S. to the extent hoped for, give strong demand for yield, and dollars. And there will still be trading between the two countries, necessitating China dollar holdings.