China Cuts Exposure to U.S. Treasuries
China is reducing U.S. bond exposure, favoring gold, while investors increasingly look to bitcoin.
China has instructed its largest banks to scale back their exposure to U.S. Treasury bonds. This move signals a meaningful shift in the country’s approach to global finance, driven by concerns over rising U.S. debt risks and increasing market volatility.
Available data indicate that Chinese financial institutions were warned against excessive concentration in U.S. bonds. They were advised to reduce oversized positions and limit new purchases. As a result, China’s holdings of U.S. debt have fallen to around $682.6 billion—the lowest level in 17 years and far below the more than $1.3 trillion held a decade ago.
This process has been unfolding for years. Over the past 14 years, China has cut its exposure to U.S. debt by more than $500 billion, while steadily increasing its gold reserves. Beijing has been buying gold continuously for 18 months, highlighting a clear preference for hard assets over government bonds.
The new guidance does not apply to the central bank’s official foreign exchange reserves, but rather to commercial banks and their dollar-denominated assets. Reducing China’s role as one of the largest buyers of U.S. Treasuries could weaken market stability, increase volatility, and push yields higher.
In such conditions, investors often seek alternatives. Historically, gold has benefited the most, with prices rising nearly 72% over the past year and recently reaching around $5,600 before entering a corrective phase.
China’s move to limit U.S. bond holdings stems from several long-term factors. Chief among them are growing concerns about the stability of U.S. public finances and the level of debt, which heighten the risk of bond price fluctuations. In addition, Beijing has long pursued reserve diversification and a reduced reliance on the dollar, favoring assets seen as more resilient to inflation and geopolitical tensions. In this context, trimming U.S. Treasuries is part of a broader strategy to reshape the structure of China’s assets rather than a one-off decision.
