🇨🇳 China is financing the USA less and less through lending and is buying more and more gold instead

China’s share of US government debt has now fallen back to the level of the early 2000s. At its peak, Beijing held around $1.3 trillion worth of US Treasury securities. According to the latest published data, the volume has fallen to approximately $633 billion. Against the backdrop of the enormous increase in total US debt, China’s share of it has declined even more sharply. At the same time, the People’s Bank of China is continuing to expand its gold reserves. The purchases have now continued for 22 consecutive months, and in August alone, the reserve increased by 650,000 ounces. The development of Chinese holdings of US government debt can be directly verified in the US Treasury Department’s statistics.

This is far more than merely a change in the figures for the reserves. China is gradually exchanging US debt securities for an asset that cannot be printed and that is significantly harder to block from the outside. Speaking of the end of the dollar is still absurd at present, however, because it continues to account for around 57% of global currency reserves, while the yuan’s share is only a few percent, as shown by the IMF statistics. If, however, other central banks increasingly follow China’s example, the consequences will be systemic: lower ongoing government demand for Treasuries, higher debt-servicing costs for US government debt, additional demand for gold, and a gradual reduction in the global financial system’s dependence on the USA.

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