Money in the bank: China's holdings of U.S. Treasuries increases to new record
Figures may spur on China to take on more U.S.-held debt
China's holdings of U.S. treasuries have swelled to a record-breaking $1.317 trillion. These figures for the month of November were inadvertently released on the Treasury Department's Web site, originally intended to shown the following morning.
Capital inflows and intervention to limit gains in the yuan have contributed to China building up currency holdings that are a third of the global total.
China's ever growing foreign-exchange reserves, reported to have reached a world record $3.82 trillion at the end of December, may sustain China's desire for U.S. debt. Capital inflows and intervention to limit gains in the yuan have contributed to China building up currency holdings that are a third of the global total.
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"Large interest-rate differential and steady appreciation of the renminbi contributed to large arbitrage inflows into China, a situation made all the more easy with China's increasing financial integration and renminbi internationalization," UBS AG Hong Kong-based economist Wang Tao wrote in a report.
However -- China's pace of foreign-exchange reserve accumulation will be slower this year on account of the Federal Reserve's monetary tapering. This includes the likely widening of the yuan's trading band and tighter controls on arbitrage activities, Wang said.
Because of an error, limited amounts of data were posted on the department's Web site ahead of the official release, and were removed as soon as it was discovered, a Treasury spokeswoman said.
The yuan this week reached 6.0406 per dollar, the strongest since the government unified the official and market exchange rates at the end of 1993. Yi Gang, a deputy governor at the central bank, said last November that it was "no longer in China's favor to accumulate foreign-exchange reserves."
The U.S. data showed net long-term portfolio investment outflow was $29.3 billion in November after a revised inflow the month before of $28.7 billion, the Treasury's figures showed. The total cross-border outflow in November, including short-term securities such as Treasury bills and stock swaps, was $16.6 billion.
The Standard & Poor's 500 Index (SPX) gained 2.8 percent in November. Investors in Treasuries lost 0.4 percent that month, according to Bloomberg World Bond (BUSY) Indexes.
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