**10,000 Fans Incentive Plan
Recent data released by the U.S. Treasury Department showed that the top three overseas holders of U.S. Treasuries — Japan, China and the United Kingdom — all increased their holdings in December 2023. Of the three countries, the UK has the largest number of holdings.
According to the U.S. Treasury Department's December 2023 International Capital Flows Report (TIC), Japan increased its holdings of U.S. Treasuries by $10.7 billion that month, bringing its total holdings to $1,138.2 billion, continuing to be the largest foreign creditor of the United States.
China also increased its holdings of U.S. Treasuries by $34.3 billion in December 2023, bringing its holdings back to $816.3 billion. This is the second time that China has increased its holdings of U.S. Treasuries after seven consecutive months** since April last year.
As the second-largest overseas holder of U.S. Treasuries, China's holdings have fluctuated over the past year. Since April 2022, China's U.S. debt holdings have been below $1 trillion. In particular, between August 2022 and February 2023, China has been ** US Treasury bonds for 7 consecutive months. But in March 2023, China increased its holdings of U.S. debt by $20.3 billion, but from April to October of the same year, China again increased its holdings for seven consecutive months**. However, in November and December of the same year, China began to increase its holdings of US Treasuries, increasing its holdings by $12.4 billion and $34.3 billion, respectively.
In the current international economic environment, de-dollarization has become a hot topic. However, against this backdrop, China still chooses to increase its holdings of US Treasuries. What is the meaning behind this? In Chun Gongzi's view, there are the following reasons for reference:
First, as one of the most liquid, safe and stable assets in the world, U.S. Treasury bonds are of great significance to China's foreign exchange reserve management. While protecting the safety of foreign exchange reserves, it is a reasonable choice to increase holdings of U.S. bonds in order to avoid risks. As the risk of market uncertainty increases, many investors tend to move their funds to safer assets, and US Treasuries are undoubtedly an important option. In addition, China can also obtain certain investment income by increasing its holdings of U.S. bonds, which is of positive significance for the preservation and appreciation of its foreign exchange reserves.
Second, the purchase of U.S. Treasury bonds can help China stabilize the RMB exchange rate and create favorable conditions for domestic economic development. In addition, the purchase of U.S. Treasury bonds helps China maintain its economic relationship with the U.S. and promote bilateral** and investment cooperation.
In the end, the investment cooperation between China and the United States is interdependent. China's purchase of U.S. Treasuries can be seen as supporting the U.S. economy, thereby maintaining a healthy global economic environment, which is beneficial to both sides in the long run.
Overall, China's purchase of U.S. Treasury bonds is a complex decision that involves multiple levels, including exchange rate policy, foreign exchange reserve management, international relations, and economic strategy. Despite the trend towards de-dollarization, China still considers holding U.S. Treasuries to be an important part of its macroeconomic management and foreign policy.
De-dollarization and the internationalization of the renminbi are not contradictory
In the current international economic landscape, countries are seeking to maximize their own interests, including reducing dependence on any single currency and promoting the international use of their own currencies.
Drivers of de-dollarization:De-dollarization is a measure taken by many countries to get rid of excessive dependence on the US dollar and reduce the impact of US economic policy changes on their own economies. This trend is partly due to the international sanctions policy pursued by the United States and the drawbacks of the dollar's hegemony. The process of de-dollarization may include the sale of U.S. Treasury assets, the adoption of other currencies and investment activities, among others.
Performance of RMB internationalization:The internationalization of the renminbi refers to the increased use of the renminbi on a global scale, including its functions as a denomination, payment, and reserve currency. Although the current proportion of RMB settlement in the international market is relatively low, its upward trend shows that the RMB is gradually strengthening its international status.
Although there may seem to be a contradiction between de-dollarization and the internationalization of the renminbi, in fact the two do not conflict. De-dollarization is a reflection and challenge to the hegemony of the US dollar by countries around the world, and the internationalization of the RMB is China's efforts to promote the diversification of the global monetary system. Against the backdrop of challenges to global economic and financial stability, countries need to work together to promote the reform and improvement of the global monetary system to achieve more balanced, stable and sustainable development.