Allianz Global say that the decision by China to sell $34.2bn worth of US government bonds in December may herald the beginning of the much anticipated diversification of its foreign exchange holdings that has permeated markets since the onset of the global financial crisis.
Up until December 2009, China was the largest single holder of US government bonds but the sale sees it now lagging behind Japan which holds $768bn of treasuries.
Allianz Global sources suggest that the sales were inevitable given that China’s leaders have repeatedly expressed concerns about US fiscal policy.
December’s $34bn sell-off made only a tiny dent in Beijing’s total holdings of US assets, which total over $1tn when stakes in American corporations, as well as treasury bills, are taken into account.
China has been acquiring mining and oil exploration and production companies as it seeks to secure supply of raw materials into the future but Allianz Global analysts are thought to believe that the country will seek to increase its holdings of gold. The International Monetary Fund announced that it was going to sell the remainder of the 400 tonnes of gold earmarked for orderly disposal in an effort to raise more money for development in other countries.
The Indian central bank recently purchased 200 tonnes of IMF gold at around $1040, a price which many believe has set the floor for the gold price.