De-dollarisation talks are again doing the rounds after the latest data from the US Treasury Department indicated that China offloaded approximately $50bn in US Treasuries in Q1 2024.
De-dollarisation Rumours Surface As China Offloads US Treasuries
Global Finance indicated that China “reduced its holding by more than $100bn in the year through to March 2023”. Global Finance stated that Belgium, which is reportedly a “proxy custodian for China’s debt holdings”, sold over $20bn of US Treasuries during this period.
Although many regard this as a directed effort on China’s part, other analysts have pointed out that it may simply be a matter of managing the country’s debt. Should this not be the case and China is indeed getting rid of its US debt and pushing the global prominence of the renminbi, the US may have to re-strategise the dollar’s strength position.
According to Global Finance, Brad Setser, a senior fellow at the Council of Foreign Relations, mentioned on X that the motivation behind China’s action “remains unresolved”. Analysts, however, have pointed out that this trend possibly reflects an attempt to moderate risks should the US impose sanctions over China’s relationship with Russia.
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Also, US import taxes on Chinese goods may drive China to diversify its holdings. The country’s gold reserves reportedly increased by more than 27 tons during Q1 2024.
The BRICS trade bloc, comprising Brazil, Russia, India, China and South Africa, has voiced its concern regarding the US dollar’s macroeconomic control and indicated that it is looking into other reserve currency options.
The USD/CNY currency pair started Monday 3 June 2024 trading at 7.2410.
