US debt held by China drops to lowest in 12 years

The total U.S. debt held by China has reportedly dropped to its lowest rate in 12 years, according to data released by the Treasury Department.

The data published Monday found that China’s holding of U.S. debt dropped to $980.8 billion in May, down $23 billion since April. 

As of now, Japan is the leading holder of U.S. debt, with $1.2 trillion, data noted. 

CNBC reported that this is the first time since 2010 that China’s debt holding has fallen below the $1 trillion mark. The news outlet added that the drop can be attributed to China’s government working on issues to diversify its foreign debt portfolio. 

The new data release comes as the Federal Reserve has been raising interest rates to curb the rise of inflation in the U.S. 

Last month, the Fed issued a 0.75 percentage point hike in interest rates, the largest increase in nearly 30 years. 

Speaking at a Senate Banking Committee hearing, Federal Reserve Chairman Jerome Powell acknowledged that the recent battle with inflation could tip the country into another recession.