China becomes largest lender to US government
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China purchased the most Treasuries in six years in June, vaulting past Japan as the largest overseas lender to the US government, possibly taking advantage of recent weakness in the dollar in a rising US interest rate environment.
Tuesday’s report from the US Treasury Department also signaled that China has steadily ratcheted up its accumulation of US government debt as it has burned far less of its foreign exchange reserves this year to defend the yuan currency.
In 2016, China spent nearly $320 billion of foreign exchange reserves in an effort to stem the yuan’s depreciation against the US dollar.
In the wake of tighter capital controls and a weaker dollar so far this year, China’s forex reserves, the world’s biggest, have grown in line with its Treasuries holdings.
