China’s Withdrawal from U.S. Treasury Bonds: Analyzing the Impact

An economist discusses why China is decreasing its investments, in U.S Treasury bonds.

Economist Belyayev suggests that Chinas decreased investment, in U.S debt is connected to increasing tensions.

According to analyst and economist Mikhail Belyayevs interview with Izvestia on November 29th China has reduced its investments in U.S government bonds due, to escalating tensions with Washington.

According to a report by RIA Novosti, Japan and China. Two of the biggest foreign holders of U.S debt. Notably decreased their Treasury investments in the third quarter. Experts attribute this move to the election of President Donald Trump, a drastic drop, in Federal Reserve interest rates and the escalating external debt of the United States.

The United States debt is primarily held by Japan as the holder followed by China and the UK in the second and third positions respectively over the last eighteen months. Japan has an edge over China in terms of holdings while the UK follows with approximately $600 billion, in U.S securities. Belyeav mentioned that although the United States debt is on the rise Washington is currently handling it by organizing it into bond packages with maturity dates and terms, for interest payments.

Why China is Reducing Investments in U.S. Debt

He mentioned that long as the U.S fulfills its commitments on time s the debt won't lead to catastrophic outcomes. The economist also pointed out that shifting bonds doesn't directly affect the status of the debt.

Belyaev explained that China is divesting from U.S Treasury bonds in response to the tensions, with the United States.

When talking about how Trumps win affects countries cutting back on their investments, in the U.S. Belyayev stressed that the politician recognizes there won't be any "default or failure to repay the debt.". He pointed out that China and Japan might see extra risks during this time of transition.

The Role of Geopolitical Tensions in Financial Strategies

President Joe Biden signed an order in August that limits American investments in Chinas cutting edge industries such, as semiconductors and artificial intelligence starting next year.

The Washington Post mentioned that Liu Pengyu from the Chinese Embassy in Washington showed Beijings displeasure regarding the choice and emphasized the significance of investments, in advancing essential technologies.