Core Viewpoint - China has been reducing its holdings of US Treasury bonds for three consecutive months, indicating a trend towards diversifying foreign exchange reserves and increasing gold allocations [1][2]. Group 1: China's Reduction of US Treasury Holdings - In May, China reduced its US Treasury holdings by $900 million to $756.3 billion, marking the third consecutive month of reduction [1][2]. - Since April 2022, China's US Treasury holdings have remained below $1 trillion, with a general trend of reduction observed [2]. - In 2022, 2023, and 2024, China reduced its US Treasury holdings by $173.2 billion, $50.8 billion, and $57.3 billion, respectively [2]. Group 2: Reasons for Reduction - Analysts suggest that the reduction is part of a long-term strategy of "de-dollarization" due to concerns over US policy risks, geopolitical conflicts, and asset security [2]. - The diversification of foreign exchange reserves is a key driver, with an increased allocation to gold being a significant aspect of this strategy [2][3]. Group 3: Gold Reserves Increase - As of June, China's gold reserves reached 7.39 million ounces, an increase of 70,000 ounces from May, marking the eighth consecutive month of gold accumulation [3]. - The increase in gold reserves is seen as a protective measure amid global geopolitical tensions and a relatively low proportion of gold in China's overall foreign exchange reserves [3]. Group 4: Foreign Demand for US Treasuries - In May, foreign investors held a total of $9.05 trillion in US Treasuries, an increase of $32.4 billion from April, indicating strong demand despite market concerns [4][5]. - Japan and the UK, the largest foreign holders of US Treasuries, increased their holdings in May, with Japan's holdings reaching a record high of $1.135 trillion [4][5]. Group 5: Market Dynamics - The overall net inflow of foreign investments into US securities in May was $311.1 billion, with significant contributions from private investors [5]. - Despite fluctuations in the market, the fundamental demand for US Treasuries remains strong, as emphasized by US Treasury officials [6].

Core Viewpoint - The international enthusiasm for the use of the Renminbi (RMB) has significantly increased following the implementation of "reciprocal tariffs" by the United States, with a notable rise in demand for RMB in cross-border investments and trade financing [2][3][4]. Group 1: RMB in Cross-Border Trade and Investment - After the U.S. introduced "reciprocal tariffs," more Chinese enterprises are willing to use RMB for overseas direct investment (ODI), leading to increased demand for RMB in cross-border investments [3]. - The RMB is evolving from a popular trade settlement currency to a multi-functional role, including trade financing and reserve currency [4][6]. - As of the end of 2024, RMB is projected to become the third-largest trade financing currency globally, with cross-border payment amounts reaching 64.1 trillion yuan, a 23% increase year-on-year [4]. Group 2: Central Bank and Reserve Currency Trends - More emerging market central banks are incorporating RMB into their foreign exchange reserves, reflecting a trend towards diversification away from the U.S. dollar [4][9]. - Currently, RMB accounts for less than 3% of global foreign exchange reserves, indicating significant potential for growth in this area [9]. Group 3: RMB Liquidity and Financing - The liquidity of RMB in overseas markets is increasing, which is encouraging foreign enterprises to use RMB for trade financing, thereby reducing their financing costs [8][11]. - The Hong Kong Monetary Authority has introduced measures to support RMB trade financing liquidity, which will further meet the financing needs of foreign enterprises [7][8]. Group 4: Challenges and Future Outlook - The internationalization of RMB faces challenges in meeting the diverse needs of foreign enterprises for RMB settlement, investment, and reserve management [11][12]. - Enhancing RMB liquidity in overseas markets is crucial for encouraging foreign institutions to hold RMB assets, which requires the development of a diverse range of RMB financial products [12].

Group 1: U.S. Treasury Bond Market Dynamics - In April, foreign holdings of U.S. Treasury bonds reached $9.01 trillion, a decrease of $36 billion from March, with Japan and the UK increasing their holdings by $3.7 billion and $28.4 billion respectively, while China reduced its holdings by $8.2 billion to $757 billion, the lowest since 2009 [1][4][5] - The market initially speculated a large-scale sell-off of U.S. Treasury bonds by foreign official capital due to the U.S. tariff measures, but the latest TIC data indicated a relatively mild sell-off [1][2] - The 10-year U.S. Treasury yield rose from 3.86% to 4.59% in April, prompting some overseas capital to view this as an opportunity to buy at lower prices for higher yields [2][4] Group 2: Investment Strategies of Foreign Official Capital - Foreign official capital is adopting a "buy short, sell long" strategy, leading to a decrease in long-term U.S. Treasury holdings while short-term bonds are being retained [3][5] - Concerns over the sustainability of U.S. Treasury bonds due to rising fiscal deficits are causing a decline in long-term confidence among foreign official capital [3][5] - The reduction in Canadian holdings by $57.8 billion in April is seen as a response to U.S. pressures, while China's reduction is attributed to diversification of foreign exchange reserves [5][6] Group 3: Global Central Banks and Gold Reserves - Central banks are increasingly viewing gold as a strategic asset, with expectations that gold will account for 20% of global official reserves by 2024, surpassing the euro [7][8] - Approximately 95% of surveyed central banks anticipate continuing to increase their gold reserves in the next 12 months, reflecting a growing preference for gold amid economic and geopolitical uncertainties [8][9] - The motivations for increasing gold reserves include its long-term value storage function, portfolio diversification, and stable performance during crises [8][9]