China Slashes US Treasury Holdings Amid Debt Concerns
Over the past decade-plus, the world's second-largest economy has been steadily reducing its massive holdings of US government-backed securities.
Recent data from the U.S. Treasury Department reveals that China’s grip on Treasury securities has plummeted to its lowest point in more than 14 years.
China had been steadily accumulating these securities until May 2013, amassing a record $1.297 trillion in holdings.
Since then, China, part of the BRICS nations, has been consistently offloading its Treasury securities, slashing its ownership down to $805.4 billion as of August 2023 – a staggering decrease of more than $491 billion from its peak.
This move aligns with a notable shift in the perception of the United States’ debt, signaled by a major rating agency.
Moody’s, recently altering its outlook on the nation’s credit rating from stable to negative, cites concerns over the country’s weakening financial stance and political discord in Washington.
Moody’s analysis emphasizes that the absence of effective fiscal policies to curtail government spending or bolster revenues, combined with rising interest rates, is expected to sustain substantial fiscal deficits for the US. This, in turn, significantly compromises the country’s capacity to manage its debt.
While a negative outlook on the nation’s debt doesn’t automatically imply an immediate credit rating cut by Moody’s, it does raise the possibility of such an action in the future.