China Sells $190B in Treasuries, Buys Gold

The world has long suffered from the dominance of the US dollar!

Currently, China is intensifying its efforts to "de-dollarize," and countries like Russia and Turkey are also advancing their "de-dollarization" processes, while the US is mired in a quagmire of massive debt and high inflation.

In February, the Federal Reserve initiated the first interest rate hike of 2023, and despite eight consecutive hikes, inflation has not been curbed, but the debt continues to swell.

How long can the dollar hegemony sustain?

China significantly reduces its holdings of US Treasuries.

China has stepped up its efforts to reduce its holdings of US Treasuries.

According to relevant data, since the beginning of 2022, China has reduced its holdings by over $190 billion.

According to data released by the US Department of the Treasury in mid-January, China reduced its holdings by $7.8 billion in November 2022, maintaining the operation of reducing US Treasuries for three months.

China's holdings of US Treasuries have dropped to $870 billion, the lowest level in 12 years, indicating the strength and determination of China's efforts to reduce its holdings of US Treasuries.

Official data shows that at the beginning of 2022, China held $1.06 trillion in US Treasuries, which significantly dropped to $870 billion after 11 months, a decrease of $190 billion.

Due to the reduced position, China has become the second-largest holder of US Treasuries.

Not only China, but Japan has also been reducing its holdings of US Treasuries for most of the past year, with a reduction of $220 billion compared to the beginning of 2022.

Additionally, many other countries are also increasing their efforts to reduce their holdings of US Treasuries.

Undoubtedly, the US dollar is gradually "falling out of favor."

On one hand, high inflation in the US has led to a decline in the investment returns of US Treasuries, prompting central banks overseas to reduce their holdings.

On the other hand, China is adjusting the structure of its overseas assets to ensure the safety and investment returns of its overseas assets, and reducing holdings of US Treasuries is one of the measures.

China is massively buying gold.

According to a report by the Nikkei Chinese website, since 2022, central banks around the world have set a new high in purchasing gold for over 50 years, and the US dollar seems to be "abandoned."

Since January of this year, the price of gold has continued to rise, largely due to a significant increase in demand for gold purchases by central banks.

Among them, China has been continuously buying gold in November and December of last year, and China's gold reserves have now increased to 2010 tons.

In the current international environment, increasing gold holdings is undoubtedly a wise choice.

According to data released by the World Gold Council, from January to September 2022, central banks around the world collectively bought 670 tons of gold, with Russia and Turkey also increasing their purchases of gold.

Analysts believe that the foreign exchange reserves of central banks are moving towards "diversification," rather than being exclusively in US dollars.

Increasing gold holdings has become a common choice for many countries, and more countries will choose to buy gold in 2023.

In China's foreign exchange reserves, the proportion of gold is around 4%, leaving significant room for improvement.

How long can the dollar hegemony sustain?

As of now, the US debt has exceeded $31 trillion, while the US GDP last year was around $25 trillion.

The US has used the status of the US dollar to issue excessive currency to solve crises, but the resulting high inflation has become another headache.

The Federal Reserve personally stepped in to raise interest rates to curb inflation, but the aggressive rate hikes have also caused a blow to its economy.

For the first time, the growth rate of US M2 has declined, and the economy has been backfired.

The US GDP reached a new high in 2022, but most of it was "printed," with a nominal growth rate of up to 9%.

Excluding the factor of rising prices, the actual growth was only 2%, with high inflation contributing to 7% of the illusory prosperity.

However, the debt scale is growing rapidly.

How long can the game of borrowing new to repay old continue?

Rationally speaking, the collapse and disintegration of dollar hegemony may be a long process, but the misuse of currency status and the destruction of its own credit system will undoubtedly accelerate the decline of dollar hegemony.