China cuts US T-bonds to expand Yuan trade

China has made the first annual reduction in its holdings of US Treasury bonds in a decade sending a strong signal that it is beginning to rapidly diversify its portfolio of foreign currencies.

Written by Press Trust Of India | Beijing | Published: March 4, 2012 12:45 am

China,the largest holder of US treasury bonds,has cut its American debt holding by $8.2 billion amid moves by its central bank to rapidly expanding the Yuan-denominated cross-border trade to promote the use of the Chinese currency in foreign trade.

China has made the first annual reduction in its holdings of US Treasury bonds in a decade sending a strong signal that it is beginning to rapidly diversify its portfolio of foreign currencies.

According to the latest monthly figures from the US Treasury Department,China’s holdings of US Treasury bonds dropped for a fifth consecutive month in December to $1.15 trillion.

As per the revised data,China cut its holdings of dollar debt by $8.2 billion in 2011 compared with the previous year.

It was the first time that the country had reduced its yearly holdings since 2001,state run China Daily reported on Saturday.

Experts are viewing the move as a sign that the country is accelerating the move away from dollar assets in search of more diversified investment channels,it said.

Senior Chinese officials,including the central bank governor Zhou Xiaochuan,have stressed the importance of diversification of China’s foreign-exchange reserves to minimise negative impact of fluctuations in the international financial markets.

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