Global alert: China carried out a historic sale of US bonds, what did it do with the dollars?

China would be getting rid of a record amount of US Treasury bonds, and at the same time it is making gold, according to the Bloomberg agency. However, not everyone is convinced of this narrative.. Michael Pettisan expert on Chinese financial markets cited by the North American press, shows skepticism regarding this information.

According to the agency, China sold a record amount of U.S. Treasury and agency bonds in the first quarter, highlighting the Asian nation’s move to diversify away from U.S. assets as trade tensions persist.

Specifically, the Asian giant sold US$53.3 billion in Treasury bonds. Belgium, considered a custodian of Chinese holdings, also reduced its holdings by $22 billion during the same period, according to data from the US Treasury Department. This move was interpreted as a Chinese strategy. to diversify and reduce your exposure to US assetsin a context of growing trade tensions between both nations.

Trade tensions are escalating under the administration of Joe Biden, who decreed additional tariffs on a wide range of Chinese products. His predecessor, Donald Trump, suggests that if he returns to the White House, he could impose even higher tariffs.

Stephen Chiu, chief Asia rates and currencies strategist at Bloomberg Intelligence, noted that China’s bond selling could accelerate if the trade war between the powers resumes, especially if Trump returns to the presidency. “China’s clear intention appears to be to diversify away from US dollar holdings”Chiu stated.

China: what is behind this movement

On the other hand, Pettis suggests that although China has sold Treasuries in the past, This action should not be interpreted as a sign of strength or as an attempt to destabilize the United States. The sales could be related to efforts to support the yuan or hide holdings in state-owned companies. Furthermore, Pettis emphasizes that “get rid” of these bonds would not have a devastating impact on the US economy, despite the alarmist interpretations that often emerge in the media.

China’s purchase of gold, howeveris less disputed and appears to be a hedging strategy against possible sanctions and to stabilize its economy.

In this context of global economic uncertainty, China could also be seeking to divert part of the impact of its policies towards the European Union, while maintaining its mercantilist export approach. An example of this is the production of plug-in hybrid vehicles by BYD in Mexico, a strategy to maintain its export competitiveness.

However, the escalation of the trade war seems inevitable, regardless of the outcome of the upcoming US elections. Both Beijing and Washington would benefit of a more balanced approach that promotes domestic consumption rather than over-reliance on exports.

Likewise, analysts maintain that although there are indications that China could be reducing its holdings of US debt and acquiring gold, the interpretation and implications of these actions remain a matter of debate. The truth is, China’s investments in the US are attracting renewed investor attention amid signs that tensions between the world’s largest economies may worsen.