China Moves Away From US Dollar Ahead of Digital Yuan
- China Moves Away From US Dollar Ahead of Digital Yuan
by Shaurya Malwa, https://decrypt.co/
The Eastern superpower is reducing its US dollar exposure amidst fears of inflation and ahead of the launch of its digital currency.
-In brief- China is reducing exposure to the US dollar amidst fears of massive inflation.
- The country has sold over $109 billion worth of US bonds in the first half of 2020.
- Its upcoming digital yuan is a contender to the US dollar’s long-held global dominance.
China is likely to reduce its holdings of US Treasury bonds to just under $800 billion from the current level of more than $1 trillion, according to local news outlet Global Times.
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A major reason for the reduced exposure is the record amounts of US dollars being printed by the country’s Federal Reserve, leading to fears among investors and central banks of imminent inflation. Another is US President Donald Trump’s repeated attacks on the Chinese administration, the report said.
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Currently, China is the world’s second-largest holder of US debts, but it has been reducing its holdings of US bonds in recent years. In the first half of 2020 alone, China sold an estimated $106 billion worth of US bonds—a 3.4% decline compared to 2019.
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Xi Junyang, a professor at the Shanghai University in China was cited as saying that China is on track to reduce its holdings of US bonds from $1 trillion to $800 billion. But he added, “China might sell all of its US bonds in an extreme case, like a military conflict.”
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