A report that China is considering slowing or halting purchases of US Treasury bonds may be based on erroneous information and could be “fake”, the country’s foreign exchange regulator said on Thursday.
Bloomberg News reported on Wednesday that Chinese officials reviewing the country’s vast foreign exchange holdings had recommended slowing or halting purchases of US Treasury bonds amid a less attractive market for them and rising US–China trade tensions. The report sent US Treasury yields to 10-month highs and sent the dollar lower.
“The news could quote the wrong source of information, or may be fake news,” the State Administration of Foreign Exchange (SAFE) said in a statement published on its website.
Bloomberg News could not immediately comment on the foreign exchange regulator’s statement.
The US 10-year Treasury yield edged down to 2.5366 per cent from Wednesday’s close of 2.549 per cent, while the dollar gained 0.3 per cent to 111.72 yen after the regulator’s comment.
China has been diversifying its foreign currency reserves investments to help “safeguard the overall safety of foreign exchange assets and preserve and increase their value,” the SAFE said. The forex reserves investment in US Treasury bonds is a market activity, with investment professionally managed according to market conditions and investment needs, it said. The regulator added that forex reserves management agencies are responsible investors in international financial markets.
The exact composition of China’s reserves is a state secret and the subject of intense scrutiny by global investors. According to data from the Treasury Department, the country is the biggest foreign holder of US government debt, with $1.19 trillion in Treasuries as of October 2017.
China’s foreign exchange reserves, the world's largest, rose $20.2 billion in December to $3.14 trillion, as tight regulations and a strong yuan continued to discourage capital outflows, data from China's central bank showed.