China's U.S. Treasury Holdings Drop to More Than One-Year Low

(Bloomberg) -- China’s holdings of U.S. Treasuries fell to a more than one-year low as the world’s second-largest economy takes steps to stabilize the yuan, which is under pressure from the trade war.

The Asian nation’s holdings of U.S. bonds, bills and notes declined for a fourth month to $1.15 trillion in September, from $1.17 trillion in August, the Treasury Department said in a statement Friday. China remained the biggest foreign creditor to the U.S., followed by Japan whose Treasury holdings were little changed at $1.03 trillion.

The data comes as the U.S. and China resume trade talks with President Donald Trump and China’s Xi Jinping scheduled to meet at the Group of 20 summit in Argentina, which begins Nov. 30. In preparation for a potential deal from those talks, China has presented a list of possible concessions, which Trump said on Friday left out “four or five” big items the U.S. wants.

“China wants to make a deal. They sent a list of things they are willing to do, which is a large list and it is just not acceptable to me yet. But at some point I think that, we are doing extremely well with respect to China,” Trump told reporters.

Investors are searching for any clues China may pare back its vast holding of U.S. Treasuries to retaliate against U.S. tariffs, though Beijing has given no indication it’s doing so. So far the U.S. has imposed duties on $250 billion worth of Chinese imports, and Trump said on Friday he has another $267 billion of goods targeted if the nations fail to reach a truce.

“We may not have to do that,” he said. “China would like to make a deal.”

China may be allowing its foreign-exchange reserves to decline as part of a policy to stabilize the yuan and prevent it from weakening further.

The currency already has depreciated more than 4 percent against the dollar in the past year amid signs of an economic slowdown and capital outflows. China’s foreign-exchange reserves stockpile fell by $22 billion in September to touch the lowest level since July 2017, suggesting that the People’s Bank of China may have stepped in to stabilize the yuan.

Additional analysis: China Maintains Treasuries; Foreign Buying in U.S. Rises

©2018 Bloomberg L.P.