WASHINGTON: China's US Treasury holdings fell in March to their lowest level in two years, with Beijing trimming its lending to the United States amid a protracted trade war, government data shows.
However, the modest decline came before this month's sudden crack-up in negotiations aimed at resolving the trade dispute.
In March, China's Treasury holdings fell by US$10.4 billion to US$1.12 trillion, the lowest level since May 2017, according to Treasury Department data released on Wednesday.
The decline was the first since November.
China this week announced it was raising duty rates on US$60 billion in US exports in retaliation for President Donald Trump's decision to do likewise on a US$200 billion tranche of Chinese merchandise - with plans to extend tariffs to all Chinese goods sold to the United States.
A Chinese state journalist also mused publicly about further retaliation, including the possibility that Beijing could cut its holdings of US debt.
However, Treasury Secretary Steven Mnuchin said on Monday he expected the Chinese would continue to buy US Treasurys.
"I assume so. It's a good investment," he told reporters.
Dumping US government bonds could raise borrowing costs for Washington at a time when the budget deficit is rising. However, the US central bank could decide to purchase what China sells.
And in March, overall foreign holdings of US government paper actually rose by US$88 billion, with other lenders more than making up for the decline in China's share.