China’s holdings of U.S. government paper rose the most in seven years last year, according to recently published data from the widely-watched Treasury International Capitol Report. The second-largest economy’s stockpile of Treasurys climbed more than $120 billion in 2017 to $1.185 trillion as of December. As pressure on the yuan abated last year, it began to accumulate U.S. government paper. The People’s Bank of China buys Treasurys, a mainstay of its foreign-exchange reserves, to stabilize the currency . Earlier in January, reports suggested the Chinese government would diversify away from U.S. bonds amid a flare-up in its trade relations. The reports were later refuted, but underlined bond investors’ concerns the U.S. was ramping up issuance of debt at a time when its largest foreign holder appeared unwilling to absorb this increase in supply.
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