China Reduces US Treasury Holdings Amid Economic Concerns

In October 2025, China reduced its holdings of US Treasury securities to $688.7 billion, marking the lowest level since November 2008. This reduction of $11.8 billion from September's $700.5 billion reflects growing concerns over US debt sustainability and the Federal Reserve's independence. China's Treasury holdings have decreased by more than 47% from their peak of nearly $1.32 trillion in November 2013, according to data from the US Treasury Department and Chinese financial data provider Wind.

South China Morning PostCityLabForeign holdings of US Treasuries dip in October; China cuts exposureWIONTreasury Wine Estates targets cuts amid US, China woesChristophe Barraud: China PBOC to shift focus from rate cuts by 2026Reuters

China's diminishing Treasury holdings are part of a broader trend among foreign investors. Total foreign holdings of US Treasuries fell by $5.8 billion in October, down to $9.24 trillion. While Japan and the UK increased their Treasury holdings during the same period, China's decline has been more pronounced, with its holdings dropping over 9% since the beginning of the year. The decline is attributed to persistent worries about US fiscal health, particularly following the passage of the "One Big Beautiful Bill Act," which has raised concerns about the sustainability of US debt.

South China Morning PostForeign holdings of US Treasuries dip in October; China cuts exposureCityLabWIONTreasury Wine Estates targets cuts amid US, China woesChristophe Barraud: China PBOC to shift focus from rate cuts by 2026Reuters

Yu Yongding, a former adviser to China's central bank, has expressed concerns about the risks associated with US dollar assets, indicating a shift in sentiment among major foreign holders of US Treasuries. Treasury Secretary Scott Bessent has countered narratives suggesting a widespread "sell America" trend, emphasizing that the current dynamics reflect a "Hedge America" approach rather than a sell-off.

South China Morning Post

Critics argue that the reduction in Treasury holdings signals a lack of confidence in the US economy and its financial policies. Economist Peter Schiff has warned that the decline in Treasury holdings, coupled with rising gold and silver prices, could lead to significant economic challenges in the US, including soaring consumer prices and unemployment. However, Schiff's views are often seen as alarmist and should be interpreted with caution.

WIONSouth China Morning PostCityLabForeign holdings of US Treasuries dip in October; China cuts exposureChristophe Barraud: China PBOC to shift focus from rate cuts by 2026Treasury Wine Estates targets cuts amid US, China woesReuters

While China's Treasury holdings have decreased, other countries have shown mixed trends. Japan's holdings rose to $1.2 trillion, the highest since July 2022, while the UK also increased its Treasury investments. In contrast, Canada saw a significant decline in its holdings, dropping to $419.1 billion. This disparity highlights the varying responses of different countries to the current economic climate.

CityLab

As China continues to adjust its financial strategies, including a potential diversification away from US dollar assets, the implications for global markets and the US economy remain significant. The ongoing scrutiny of US fiscal policies and the Federal Reserve's actions will likely influence future foreign investment trends in US Treasuries.

WION