It is reported that the Sino-US game in recent years has not only been reflected in the fields of trade wars, technological blockades and military confrontations, but the competition between the financial and capital markets has also become the focus of global attention. China has continuously reduced its holdings of U.S. Treasury bonds on a large scale, especially from March to July, selling a total of about US$53.7 billion (about RMB 382 billion), a move that has sparked widespread discussion. At the same time, Berkshire Hathaway, controlled by stock god Buffett, also announced that it had completely cleared its shares in BYD.
Since 2022, China’s holdings of US bonds have gradually decreased. Four large-scale reductions this year have reduced China’s US bond holdings to US$730.7 billion, the lowest level in recent years. In fact, China’s reduction in U.S. debt holdings is not an overnight decision, but a reflection of its long-term strategy. Judging from the situation in the past few decades, China was once the largest holder of US Treasury bonds, and its purpose was very simple – to stabilize its foreign exchange reserves by holding a large amount of US Treasury bonds and ensure the stability of the RMB exchange rate. As a global reserve currency, the US dollar has long been regarded as a safe asset, and investing in US Treasury bonds is a common choice for many countries.
However, with the deterioration of Sino-US relations, especially during the Trump administration, the United States imposed tariffs, imposed sanctions and the massive depreciation of the US dollar, it has made China realize the potential risks of holding too much US debt. What’s even more fatal is that the United States freezes Russia’s overseas sovereign assets in 2022, which undoubtedly makes all countries that rely on US dollar assets deeply alert. On the one hand, China is facing rising tariff barriers, and on the other hand, it is also worried about the shrinking value of US debt. With global economic turmoil and geopolitical risks intensifying, holding large amounts of U.S. debt is no longer considered a “risk-free” investment.
From a strategic perspective, China’s reduction in U.S. debt holdings is a concrete action to de-dollarize. Reducing holdings of US Treasury not only is to avoid over-reliance on US dollar assets, but also to find more “safe zones” in the global financial system. If the United States continues to interfere in the global economy through financial sanctions, printing money or other means, it will be particularly important to reduce its dependence on US debt. At the same time, China is accelerating the diversification of assets, and assets such as gold and other countries’ currencies have become new investment directions. China’s move also reflects its profound predictions of the future economic pattern.
Buffett’s clearance of BYD’s stock seems to be a typical stock market operation on the surface, but there are more complicated considerations behind it. Looking back on this history, the relationship between Buffett and BYD can be said to be a legend. In 2008, Buffett invested in BYD through his subsidiary Berkshire Hathaway, and purchased 225 million shares of BYD for the first time, with an investment amount of only US$230 million. At this time, BYD’s stock price was only HK$8 per share, and no one expected that this investment would bring nearly 40 times the appreciation of BYD’s stock price in the next 17 years. It can be said that this is a typical “stock god” investment.
However, since 2022, Buffett has begun to gradually reduce his stake in BYD. By the first quarter of 2023, Buffett’s Berkshire Hathaway had completely cleared BYD stock. Why did Buffett choose to let go while enjoying huge returns? Judging from Buffett’s own remarks, this decision is obviously based on predictions of uncertainty in Sino-US relations and global economics. Buffett has repeatedly stated that Trump’s tariff policy has put the US economy in a huge challenge, which has directly affected other companies under Berkshire Hathaway. As the Sino-US trade war intensifies, Buffett believes that although BYD’s prospects are bright, he, as a long-term investor, must make adjustments in such a global economic environment.
Buffett’s sell-off is not only based on his judgment on BYD’s future development, but also a response to the current deterioration of Sino-US relations. By withdrawing from the Chinese market, Buffett is actually avoiding being deeply involved in the Sino-US game. His withdrawal may trigger the follow-up sale of other foreign institutions, thereby affecting BYD’s stock price.
