By Bloomberg – Re-Blogged From Newsmax
Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter.
China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the recommendations of the officials have been adopted.
The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they’re not allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter.
The investment strategies discussed in China’s review don’t concern daily purchases and sales, said the people. The officials recommended that China closely watch factors such as the outlook for supply of U.S. government debt, along with political developments including trade disputes between the world’s two biggest economies, when deciding whether to cut some Treasury holdings, the people said.
For most of last year, China was adding to its U.S. sovereign debt holdings, monthly Treasury Department data show. The stockpile climbed the most in six years in June, after people familiar with the matter said that month that China was prepared to increase its Treasury investments under the right circumstances. An appreciating currency in 2017 helped the country rebuild its foreign-exchange reserves.
President Donald Trump’s tax-cut package will reduce federal revenue by more than $1 trillion over the next decade, even after accounting for their beneficial effects on the U.S. economy, according to Congress’s tax scorekeeper.