Chinese regulators have instructed banks to reduce their holdings of US Treasury bonds.
Official reason: Concentration risks and market volatility. However, the timing shortly before the planned Trump-Xi summit is making global markets sit up and take notice.
The gradual farewell to the dollar
For years, China has been consistently reducing its official reserves of US debt—these recently fell to $683 billion, the lowest level since 2008.
- The current instruction now targets commercial banks, which hold an estimated nearly $300 billion in US bonds.
Market reaction
Yields on US securities rose immediately after the news broke, while the dollar weakened slightly against the yen and euro.
Since 2025, the US dollar has been losing significant ground despite stable yields; in other words, investors are avoiding the currency despite attractive interest rates.
The Big Picture
The debate over the attractiveness of US Treasuries as a safe haven is growing.
- Concerns exist around Trump's stance on the dollar, the independence of the Fed, and the growing US debt burden.
- Parallel to this, China has been buying gold for 14 months—reserves now stand at over $390 billion.
US Treasury Secretary Bessent countered: 2025 was the best year for the Treasury market since 2020, with record demand at auctions from foreign investors.
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