China's total holdings of US government debt in November reached a record $1.317 trillion, a development that could mean added pressure to help currency appreciation in the world's second-largest economy, according to analysts.
China increased its US Treasury securities by $12.2 billion from October to remain the US's largest creditor, staying above the $1.3 trillion mark for the second consecutive month, according to data released on Thursday by the Treasury Department. Japan remained the second-largest US creditor in November, increasing its debt securities by $12 billion to $1.186 billion.
"Overall, purchases of US assets are entirely in line with what one would expect given the rapid increase in headline reserves," Troutman said. "2013, especially the back half of the year, was one of remarkable foreign reserve accumulation. The main takeaway from this statistic for me is that pressure to appreciate remains very strong."
"Policymakers in China are still grappling with how to balance the need for shorter domestic economic stability with the need - or necessity - for longer-term structural change," Troutman added. "2013 shows that stability is still king."
Foreign demand for US assets weakened as net foreign purchases of long-term securities totaled $29.3 billion in November, compared to purchases of $35.4 billion in October, the data showed.
According to a Jan 15 blog post written by Troutman on China Economic Watch - the PIIE blog that monitors China's economy - the People's Bank of China announced that its foreign-exchange reserves jumped $157 billion in the fourth quarter, bringing the total increase in reserves to $508 billion for 2013.
"This marked pickup in reserve accumulation, coupled with persistent trading of the renminbi at the top of its official trading range and a premium on the offshore Chinese yuan, suggests that pressure to appreciate could continue into 2014," wrote Troutman.
Source: Chinadaily
