China’s holdings of South Korean debt have more than doubled this year as Beijing continues to diversify away from the US dollar, Bloomberg reported. Korean Treasury bonds held by Chinese investors rose 111% to US$3.4 billion in the first half, according to Seoul-based Financial Supervisory Service. The spike in demand has led to the longest rally in the country’s sovereign debt in three years, with a 5.6% return this year in dollar terms. Chinese purchases accounted for 19% of foreign inflows, up from 10% last year, although South Korea still only accounts for little more than 0.1% of China’s total US$2.45 trillion foreign currency reserves. Beijing reduced its US dollar holdings by for the second successive month in June, while its purchases of European and Japanese debt are believed to have risen strongly.
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