A US Treasury report released on Monday showed that China continued to buy more treasury holdings in February despite simmering trade tensions between the two countries. As the US government’s largest creditor, some fear China could use this position as a retaliatory weapon in any further trade disputes.
February saw China take its stock of Treasury holdings to a total of $1.18 trillion, adding $8.5 billion during the month. In reality China bought $15 billion of long-term Treasury securities in February, however its holdings did not rise by the same amount due to factors such as price fluctuations.
As the Financial Times notes, should China wish to hit back against the US in the event of further trade measures from the White House, it could in theory shed its Treasury assets putting upward pressure on US interest rates and weakening the currency.