When the latest Treasury International Capital data was released yesterday, many were quick to conclude that not only had China’s selling of US Treasury ceased, but that with the addition of $7 billion in US government paper, China’s latest total holdings of $1270.3 billion were the highest since May of 2014. And if one was merely looking at the “China” line item in the major foreign holders table, that would be correct.
However, as we have shown before, when looking at China’s Treasury holdings, one also has to add the “Belgian” Treasuries, which is where China had been anonymously engaging in a record buying spree via the local Euroclear, starting in late 2013, which however concluded with a bang in early 2015.
It wasn’t precisely clear just why China, which had historically used UK-based offshore banks to transact in US paper in addition to the mainland, would pick Belgium (and Euroclear) or why it chose to hide its transactions in such a crude way, however the recent acceleration in capital outflow from China manifesting in a plunge in Chinese forex reserves, coupled with a record monthly liquidation in total Chinese holdings, exposed just where China was trading.
So with the benefit of the TIC data, we know that China’s Treasury liquidation has not only not stopped, but has continued. Enter, once again, Belgium, only this time it is not a “mystery” buyer behind the small central European country’s holdings, but a seller.
Just to confirm that one should add the dramatic changes in “Belgium” holdings to mainland China Treasury, here is a chart overlaying China’s Forex reserves, which as we learned today had dramatically increased by 600 tons of gold, but more importantly forex reserves declined to $3.693 trillion, a drop of $17 billion from $3.711 trillion the month before, and the lowest since September 2013!
Putting all of this together, it reveals that China has already dumped a record total $107 billion in US Treasurys in 2015 to offset what is now quite clear capital flight from the mainland, and the most aggressive attempt to keep the Renminbi stable.
Full article: China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium (Zero Hedge)