Beijing cut the holdings of US Treasuries by $6.8 billion in August, reaching the lowest level since May 2017, the latest data from the US Treasury Department, released on Wednesday, shows.

Washington’s trade war rival reduced its holdings of US government debt to $1.104 trillion in August from $1.110 trillion a month earlier. Since the beginning of 2019, Beijing cut its stockpile of US Treasury securities by nearly $23 billion and by nearly $62 billion since last August.

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Despite the drop, China still remains the second largest holder of US debt after Japan, which overtook China for the top position in June. Since then, Tokyo has been America’s largest foreign creditor, with the holdings standing at $1.174 trillion, according to the latest data. Japan added around $145 billion to its stockpile of US Treasuries in one year.

The two Asian countries held nearly a third of the total foreign holdings of US government bonds, which totaled $6.857 trillion as of August.

The US-China trade war was still raging in August, and a new round of tit-for-tat tariffs came into force on September 1. The conflict has slightly cooled since then, with both sides currently trying to hammer out phase one of the trade deal.

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“One of the reasons China has decreased holdings of US Treasury securities is to diversify its reserved assets,” senior economist at the Bank of Communications, Liu Xuezhi, told the Global Times.

While cutting the holdings of US debt, China has been boosting its gold reserves. The People’s Bank of China has added more than 100 tonnes of gold to its coffers since it resumed buying last December.

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