Global Times reported on Thursday that China is considering a reduction of the dollar portion of their reserves by more than 20%, to about $800 billion (of their total reserves of over $3 trillion). They have been slowly reducing the dollar holding over the past few years, with over $100 billion in US Treasury bonds sold off during the first half of this year.
GT quotes Xi Junyang, a professor at the Shanghai University of Finance and Economics: “China will gradually decrease its holdings of US debt to about $800 billion under normal circumstances. But of course, China might sell all of its US bonds in an extreme case, like a military conflict.”
China is aware that the current massive money printing in the US is reducing the value of the dollar, and thus of their reserves, while there is even the potential of a default if the situation continues to deteriorate.
Xi also noted that if the US were to impose drastic sanctions, such as barring China from the SWIFT dollar payment system for world trade, China would likely dump their dollars rapidly, causing chaos in the dollar system.
