China's holdings of Treasuries dropped in 2016 by most on record

China's holdings of U.S. Treasuries declined by the most on record last year, as the world's second-largest economy dipped into its foreign-exchange reserves to buttress the yuan. Japan, America's largest foreign creditor, trimmed its holdings for a second straight year.

A monthly Treasury Department report released in Washington today showed China held $1.06 trillion in U.S. government bonds, notes, and bills in December, up $9.1 billion from November but down $188 billion from a year earlier. It was the first monthly increase since May.

The People's Bank of China, owner of the world's biggest foreign-exchange reserves, has burned through a quarter of its war chest since 2014 in an effort to underpin the yuan and deter capital from fleeing the country. Chinese sales have made borrowing more costly for the U.S. government: 10-year yields rose to 2.6 percent last year, from as low as 1.3 percent. ...

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