China reducing its investment in USD; trade war with the US

Beijing: While the sale of US bonds by China in the last month was considered to be a warning shot, China has given one more shock to the United States in September. China reduced its investments in USD by 14 billion dollars. This has brought the USD share in the Chinese reserves to 1.15 trillion dollars, and this is the lowest for the year.

It is being said that heads of states of the United States and China are scheduled to meet at the G20 conference at the end of this month and discuss the trade issues. The US leadership has indicated making the actions against China more aggressive and Vice President, Mike Pence recently warned that the United States would not withdraw unless China changed its trade practices. US President Trump had announced imposing additional taxes on the entire imports of Chinese goods.

The US aggression is having its effects on the Chinese economy, and there are talks at the international level that China is not left with many options. China has consistently fired salvos of criticism on the policies and unilateral decisions of President Trump. Against this background, the Chinese moves for regular reduction of investment in USD are significant.

As per the information given by the US Treasury Department and Chinese agencies, China has been consistently reducing its investment in the US dollar over the last four months. The USD share in the Chinese reserves was to the tune of 1.183 trillion dollars. Subsequently, with the consistent selling of the USD in June July and August, the USD reserves came down to 1.151 trillion dollars at September end.

The Chinese government news agencies, dailies and analysts had warned that China could sell the US bonds as retaliation in the trade war. But there was no official Chinese reaction. The reduction in the USD reserves over the last four months, only confirms that the Chinese leadership is using the tool of selling the US bonds as a method of retaliation against the United States. Not only China, other countries like Japan, Russia, European countries, India and Turkey also have started reducing their investment in the USD. The Japanese reserves had 1.065 trillion dollars at the beginning of this year which has come down to 1.028 trillion by the end of September, and this is considered to be a record low since 2011.

Russia has indicated reducing its USD reserves to almost nil. Ireland has brought its USD reserves to below $300 billion, and a country like Switzerland has reduced its investments in UDS by 25 billion.