China’s holdings of U.S. Treasuries fell to a six-month low in July, just as a trade war between the world’s two largest economies began heating up.
China’s ownership of U.S. bonds, bills and notes slipped to $1.17 trillion, the lowest level since January and down from $1.18 trillion in June, according to data released by the Treasury Department on Sept. 18.
The first salvos in the U.S.-China trade conflict were fired on July 6, when the Trump administration activated tariffs on $34 billion of Chinese goods, which sparked immediate in-kind retaliation from Beijing.
The tit-for-tat tariff battle has since widened, with each country imposing duties on another $16 billion of goods and the U.S. slated to hit a further $200 billion of Chinese imports on Sept. 24. Beijing plans retaliatory tariffs on $60 billion of U.S. goods.
The escalating tensions have drawn attention to the leverage that China holds as the largest foreign creditor to the U.S.
China’s foreign exchange reserves rose for in July to $3.12 trillion, even amid a continued slide in the currency.
The yuan has tumbled more than 8% since the end of March while the nation’s stocks have fallen 16%, making the Asian nation’s assets among the world’s worst performers this year.
By Sarah McGregor