The pace at which China is selling its holdings of US Treasuries has accelerated dramatically since the beginning of 2018.
Against the backdrop of the escalating US-China trade war and other protectionist measures, the move has sparked concerns that China is actively weaponising its position as the largest foreign creditor to the US government. The fear is that such selling — especially at a time when foreign demand for US Treasuries has flatlined — will result in higher US interest rates, pushing up borrowing costs.
China is unlikely to use its $1tn plus of US Treasuries as a trade war weapon, however, because it would be financially destructive to both sides with China, ironically, bearing most of the burden. Indeed what's also holding China back from diverting its massive, albeit declining, stock of savings is the simple fact that there is no market as deep, liquid and safe as that of US Treasuries.