China sold $36.5 billion in US Treasuries and bonds, cutting its holding to $1,137 billion in August. This is the lowest level of US debt that China has held in over a year, and comes as a result of Standard & Poor’s credit rating cut.
In August, the US’s credit rating was cut to double A+ from triple A, with the ratings firm citing concerns over the country’s budget deficits.
Despite this, China remains the largest international buyer of US government debt.
Other countries in the region have also followed China’s lead, with Hong Kong, Taiwan, and Singapore all reducing their US debt holdings.
Experts say that countries such as China, with large dollar-denominated assets, are those most concerned with the US’s credit downgrade.
However, even after S&P’s credit downgrade, the overall demand for US Treasuries has increased. Its appeal as a “safe-haven” investment is growing amid times of economic uncertainty.
Both the United Kingdom and Switzerland have increased their holdings by around $40 billion each, while Japan increased their US debt holdings by half as much, around $21.8 billion dollars. Japan now has assets that total $936.8 billion dollars in US Treasuries and bonds.
The run for US treasuries come amid fears that the debt crisis in the eurozone have hurt growth in the region. Still, fears remain about the recovery in the US, as the world’s largest economy continues to show signs of faltering.
Experts say that the combination of these worries have made investors more wary of risk, marking a return to safe haven investments.
Analysts also say that the Chinese dumping of US assets may not be the complete picture. China purchases some of its Treasuries through London, and these figures tend to take longer before registering in the data.