China’s Holdings of U.S. Treasuries Increase to Five-Month High

China’s holdings of Treasuries rose to a five-month high in March, underscoring the allure of U.S. government debt even amid trade tensions between the world’s two largest economies.

China’s holdings of U.S. bonds, bills and notes increased by $11 billion to $1.19 trillion in March, according to Treasury Department data released in Washington on Tuesday. China remained the largest foreign creditor to the U.S., followed by Japan, whose holdings dropped by $16 billion to $1.04 trillion, the lowest level since October 2011.

Speculation is growing about whether China could use its vast Treasury holdings as a bargaining chip in a trade dispute with the U.S. The nations are threatening to impose tariffs on tens of billions of dollars of goods, fueling worries of a trade war that could roil financial markets. A Chinese delegation is in Washington this week to try to work out the differences, which U.S. Commerce Secretary Wilbur Ross on Monday described as “wide.”

China’s stockpile of foreign-exchange reserves rose by $8 billion in March, after declining in February for the first time in more than a year amid volatility in the global financial markets. The yuan has gained about 8 percent over the past year as stricter capital controls have kept money from flowing out.

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