China Advises Banks to Scale Back US Debt Exposure Amid Rising Risks
Over the last ten years, China has progressively reduced its holdings of US Treasury securities.
Once the largest foreign creditor of American debt, Beijing has been surpassed by Japan and the United Kingdom. After reaching a high of approximately $1.3 trillion in 2013, China’s Treasury portfolio has declined by about half, now estimated at roughly $650–700 billion — levels not recorded since 2008.
Sources indicated that major Chinese financial institutions have been encouraged to restrain new purchases of US sovereign bonds and decrease existing positions where exposure is considered elevated. The reported guidance does not extend to the country’s official state-managed reserves.
Data referenced in the report, attributed to China’s State Administration of Foreign Exchange, showed that as of September Chinese banks held around $298 billion in dollar-denominated bonds. However, it remains unclear what portion of that figure is specifically invested in US Treasuries.
The move is said to be part of a broader effort to mitigate market concentration risk and diversify asset exposure. It was issued shortly before a phone conversation last week between Chinese President Xi Jinping and US President Donald Trump. In October, the two leaders had agreed to a one-year trade truce aimed at easing tariffs and export controls imposed on each other’s goods.
China’s actions come amid heightened concern over volatility in US bond yields and heavy global dependence on dollar-based assets. According to reports, Germany’s financial regulator BaFin recently cautioned that the US dollar’s dominance as the world’s reserve currency could face pressure in 2026 due to geopolitical disruptions and funding strains.
These concerns followed a sharp decline in the Bloomberg Dollar Spot Index, which recorded its steepest drop since last April after Trump unveiled broad new global tariffs. Addressing fears about currency weakness last month, Trump stated the dollar is “doing great” and should be allowed to “seek its own level.”
On Monday, US Treasury securities continued to decline in price, pushing yields slightly higher, while the dollar weakened against major global currencies. Meanwhile, US Treasury Secretary Scott Bessent said last week that the Treasuries market had delivered its strongest performance since 2020 and noted record levels of foreign demand at bond auctions.
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