Several members of the BRICS alliance—Brazil, Russia, India, China, and South Africa—have significantly reduced their holdings in U.S. Treasuries. China spearheads this trend, slashing its U.S. Treasury holdings from $835.4 billion in June to $821.8 billion in July. This reduction amounts to a staggering $13.6 billion in just one month. Moreover, China has offloaded a total of $117.4 billion in U.S. government debt over the past year.
Other BRICS members follow suit
Brazil, another BRICS member, has also trimmed its U.S. Treasury holdings. The South American nation reduced its stash from $227.4 billion in June to $224.7 billion in July, marking a decline of about $2.7 billion. India is not far behind, cutting its U.S. Treasury holdings by $2.3 billion during the same period. Additionally, the United Arab Emirates, an oil-rich nation, saw its U.S. Treasury portfolio decline by $300 million, from $65.2 billion in June to $64.9 billion in July.
The reasons behind these moves are multifaceted. According to a recent report from Nikkei Asia, China is reducing its U.S. Treasury holdings to defend the yuan against a robust U.S. dollar.
The Chinese yuan recently fell to $0.136 against the U.S. dollar, a level last seen in January 2008. When countries sell U.S. Treasuries, the billions garnered from the sale often serve as capital for the nation’s central bank. This capital is then used to accumulate local currency on the open market to boost its value.
The timing of these reductions is noteworthy. It comes at a juncture when the global economy grapples with uncertainties, including inflationary pressures and geopolitical tensions.
The BRICS nations’ decision to reduce their U.S. Treasury holdings is indicative of a broader economic realignment and to move away from the U.S. dollar. It also signals a diversification strategy as these countries seek other investment forms to secure their financial futures.