SEVERE WX : Flood Warning View Alerts

China has boosted its huge stash of U.S. government debt

America's biggest foreign creditor is opening its wallet wider.China's ...

Posted: Feb 16, 2018 1:16 PM
Updated: Feb 16, 2018 1:16 PM

America's biggest foreign creditor is opening its wallet wider.

China's holdings of U.S. government debt swelled to $1.18 trillion by the end of 2017, up $127 billion from a year earlier, according to Treasury Department data published Thursday. That's an annual increase of 13%, the biggest since 2010.

China remains the top foreign holder of U.S. Treasury debt, a position it's held for most of the past decade. The second biggest is Japan, with just over $1.06 trillion. But it spent much of the second half of 2017 reducing its holdings.

Last month, Bloomberg reported that China was looking to cut back on the amount of U.S. government debt it buys, citing unidentified sources. The report, which rattled markets, was denied by Chinese authorities.

The data published Thursday only cover the period through the end of December, so they don't include the recent bout of turmoil in the U.S. government bond market triggered by fears that inflation -- and therefore interest rates -- may rise quicker than previously expected.

Related: The bond market scare might not be over

The amount of Treasuries held by China at the end of December was down somewhat from the recent high of $1.2 trillion in August. But despite month-to-month fluctuations, the trend is generally upward.

China's growing U.S. debt portfolio last year marked a sharp reversal from 2016, when it spent most of the year selling Treasuries as part of attempts to prop up its currency, which was being weakened by huge amounts of money flowing out of the country.

Those worries have now eased. The Chinese yuan has soared in value by almost 10% against the dollar since the start of 2017.

China's stash of U.S. government debt has expanded over a period in which trade tensions between the two countries have started to increase.

The U.S. trade deficit in goods with China hit $375 billion last year, according to the Commerce Department, the largest with any trading partner. President Trump has been vocal about slashing that deficit.

Related: Trump-China trade war: Who has the most to lose?

Some experts suggested that the Bloomberg report last month about the possibility of China slowing or halting its purchases of Treasuries could be "a proverbial shot across the bow" from Beijing.

Investors worry that that if China purchases fewer Treasuries, the U.S. government will have to find alternative buyers. It may also have to increase the rate of interest it pays.

But many analysts were skeptical Beijing would risk using its U.S. debt holdings as a political weapon in a trade dispute, pointing out that doing so could backfire in various ways, such as hurting global economic growth and therefore China's own industries.

Lafayette
Partly Cloudy
35° wxIcon
Hi: 41° Lo: 29°
Feels Like: 29°
Kokomo
Partly Cloudy
29° wxIcon
Hi: 38° Lo: 29°
Feels Like: 19°
Rensselaer
Clear
28° wxIcon
Hi: 37° Lo: 27°
Feels Like: 28°
Lafayette
Partly Cloudy
35° wxIcon
Hi: 38° Lo: 28°
Feels Like: 29°
Danville
Partly Cloudy
32° wxIcon
Hi: 39° Lo: 29°
Feels Like: 25°
Frankfort
Partly Cloudy
30° wxIcon
Hi: 40° Lo: 29°
Feels Like: 21°
Frankfort
Partly Cloudy
30° wxIcon
Hi: 39° Lo: 29°
Feels Like: 21°
Monticello
Partly Cloudy
28° wxIcon
Hi: 39° Lo: 29°
Feels Like: 21°
Monticello
Clear
28° wxIcon
Hi: 39° Lo: 29°
Feels Like: 21°
Logansport
Clear
28° wxIcon
Hi: 36° Lo: 28°
Feels Like: 19°
March comes in like a lamb...
WLFI Radar
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 661673

Reported Deaths: 12573
CountyCasesDeaths
Marion906391639
Lake48389876
Allen35806635
Hamilton32056396
St. Joseph29947512
Elkhart25376414
Vanderburgh21245378
Tippecanoe20000201
Johnson16336359
Porter15957270
Hendricks15813300
Clark11946181
Madison11741316
Vigo11595229
Monroe10328161
Delaware9836179
LaPorte9761196
Howard9055197
Kosciusko8561109
Bartholomew7448147
Warrick7412150
Hancock7404131
Floyd7200169
Wayne6631191
Grant6424157
Morgan6084125
Boone608288
Dubois5903111
Dearborn547067
Cass544399
Marshall5423104
Henry542093
Noble509078
Jackson464566
Shelby460290
Lawrence4180112
Gibson401281
Harrison399663
Clinton395453
Montgomery386783
DeKalb385178
Knox357285
Miami357263
Whitley349136
Huntington343976
Steuben338155
Wabash331176
Putnam329759
Ripley327061
Adams323149
Jasper315943
White297352
Jefferson294873
Daviess285396
Fayette271556
Decatur270888
Greene261280
Posey260831
Wells258274
Scott250350
Clay241044
LaGrange240870
Randolph225576
Spencer217130
Jennings215044
Washington211027
Sullivan203239
Fountain201442
Starke188051
Owen182153
Fulton178237
Jay177728
Carroll176518
Perry173235
Orange171250
Rush164722
Vermillion160442
Franklin159435
Tipton146341
Parke139216
Pike127632
Blackford120627
Pulaski106444
Newton96531
Brown94939
Benton91913
Crawford90613
Martin80114
Warren75814
Switzerland7537
Union67110
Ohio53311
Unassigned0431

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events