Calls for China to gradually reduce its exposure to US dollar assets are growing louder as Washington\u2019s national debt continues to set records, reigniting persistent worries over the long-term sustainability of an investment formerly considered rock solid.<\/p>\n
\u201cAlthough US Treasuries have not yet reached the default threshold, their expansion is unsustainable,\u201d researchers from the Bank of China wrote in the latest issue of China Money, a publication supervised by the People\u2019s Bank of China, the country\u2019s central bank.<\/p>\n
With this concern in mind, China has been trimming its US Treasury holdings for three consecutive months, while keeping them roughly unchanged at the US$756 billion level in June, according to data released on Friday by the US Treasury Department. This remains the lowest level since March 2009.<\/p>\n
The researchers noted that US economic growth would be unlikely to offset rising debt from persistent budget and trade imbalances, warning that US President Donald Trump\u2019s efforts to narrow the trade deficit could curb global demand<\/a> for the US dollar and undermine the currency\u2019s international role.<\/p>\n This, they said, would put the country in a \u201ctug-of-war\u201d, oscillating between its economic and monetary priorities.<\/p>\n