Over the past decade, lots of emerging markets, especially China, stockpiled foreign exchange reserves. It made sense to buy U.S. bonds because the dollar is still the world’s reserve currency. At the same time, hedge fund managers and others had been investing in emerging economies like China. But in the last six months, they’ve been moving their money elsewhere. Some $140 billion left China in August. A lot of that has to do with the weakening yuan and strengthened U.S. dollar.

According to Meg Lundsager, the former executive director of the U.S. portion of the IMF, China selling our government treasury bonds isn’t a reflection on the U.S. economy, but more of an effort to bolster the Chinese currency.

“Dumping U.S. government debt, that’s not what the Chinese are doing,” she said. 

Lundsager, now a fellow at the Wilson Center, said emerging market currencies have been under pressure. “So you’ve seen many other countries selling off some of their official foreign exchange reserve assets,” she said, “which is going to be held in U.S. government securities and using that to support their currency in the foreign exchange market.”

The People’s Bank of China isn’t trying to play the market, just soften the blow of all those dollars leaving China and slow down the depreciation of its currency.

“That’s what reserves are for,” said Ted Truman, a fellow at the Peterson Institute for International Economics. “If anything, it’s a little surprising that official holdings of U.S. treasuries have not gone down more.”

Official holdings refer to the bonds that the Central Bank is selling. The latest Treasury data show the Chinese Central Bank is unloading U.S. debt, but Lundsager said the same data show the Chinese are privately investing in American bonds.

“There’s been private buying, so there’s still been net buying of U.S. government securities,” she said.

She said it’s important to remember that the Treasury market is a big one — almost $13 trillion. And a couple trillion are still being held by China.