Chinese Treasury Holdings Dip in January Amid Capital Flight

  • Japan January portfolio increased for first month in six
  • Data shows net foreign inflows of long-term securities

China’s holdings of U.S. Treasuries declined as the world’s second-largest economy used its foreign-exchange reserves to support the yuan. Japan, America’s largest foreign creditor, increased its holdings for the first month in six.

A monthly Treasury Department report released in Washington on Wednesday showed China held $1.05 trillion in U.S. government bonds, notes and bills in January, down $7.3 billion from December. The selling may be more severe than the data suggested, as the tally of Belgium, where analysts say is home to Chinese custodial accounts, dropped $8.2 billion to $112 billion, the lowest since August 2015.

The latest data added to evidence China’s central bank continues to grapple with capital flight even though officials guided the yuan higher early this year. China’s foreign-exchange reserves, where the bonds are kept, dipped to $2.998 trillion in January, before nudging back above the $3 trillion mark in February and halting a seven-month losing streak. China’s reserves are near a six-year low, shrinking from a peak of $4 trillion in 2014 as policy makers sold dollars to support the Chinese currency.

Japan’s portfolio rose in January, increasing by $11.7 billion to $1.1 trillion, according to the data. Japan overtook China as the largest foreign holder of U.S. Treasuries last year.

An explainer on why the biggest U.S. creditors are selling

The report, which also contains data on international capital flows, showed net foreign inflows of long-term securities totaling $6.3 billion in January. It showed a total cross-border buying, including short-term securities such as Treasury bills and stock swaps, of $110.4 billion.

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