China Just Dumped the US Dollar

China has recently accelerated its de-dollarization efforts by dumping approximately $22.7 to $23 billion worth of US dollars and Treasury bonds, significantly reducing its holdings from a peak of about $1.35 trillion in 2012-2013 to around $750-800 billion in 2024, the lowest since 2009. This move is part of a broader strategy by China to reduce reliance on the US dollar amid escalating trade tensions and tariff wars with the United States, particularly following increased US tariffs on Chinese goods and China’s retaliatory tariffs.

China’s sale of US Treasuries is seen as a calculated risk aimed at weakening the US economy and dollar, as China is the second-largest holder of US debt after Japan. By unloading these assets, China could potentially drive up US borrowing costs and destabilize global markets. However, experts caution that dumping large amounts of US debt could also hurt China’s own economy by devaluing its dollar assets and strengthening the yuan, which might make Chinese exports more expensive and less competitive.

The US Federal Reserve could counteract the impact of China’s bond sell-off through quantitative easing, but ongoing tariff fluctuations complicate economic policy decisions. This financial maneuver by China is part of a long-term strategy to chip away at the dominance of the US dollar in global trade, including efforts to boost alternative currencies and increase currency swaps with other countries.

In summary, China has indeed been dumping US dollars and Treasury bonds as a strategic response to US tariffs and to advance its de-dollarization agenda, marking a significant shift in global economic dynamics.

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