From 2008 through the first quarter of 2015, China bought $117 billion of US stocks, riding the big Fed-induced bull market to its peak. Q1 of 2015 was particularly strong, with $20 billion in share purchases.
But in Q2, Chinese investors dumped a net of $14 billion of US stocks; in Q3 $34 billion; and in Q4 they threw another $68 billion out the door, according to a note by Goldman Sachs, reported by MarketWatch. In total, they sold $116 billion in shares over the last three quarters of 2015!
From all the stocks they’d accumulated since 2008, a total of $117 billion, they’re now down to their last $1 billion. Of all the purchases since 2006, they only have $25 billion in US equities left. To top it off, they also sold $130 billion of US corporate bonds last year.
The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20 percent of its war chest since 2014, dumping about $250 billion of U.S. government debt and using the funds to support the yuan and stem capital outflows.
While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines.
The nation’s stash of American stocks sank about $126 billion, or 38 percent, from the end of July through March, to $201 billion, Treasury Department data shows. That far outpaces selling by investors globally in that span — total foreign ownership fell just 9 percent. Meanwhile, China’s U.S. government-bond stockpile was relatively stable, dropping roughly $26 billion, or just 2 percent.
Switching to selling stocks allows the PBOC to retain safer, more liquid assets such as Treasuries that it can unload easily in times of turmoil. Two rounds of declines in the yuan in the last 10 months spurred market volatility worldwide and led investors to monitor China’s reserves as a measure of how much of its war chest the country was burning through to combat capital flight.