China’s U.S. Treasury holdings have dropped to their lowest since 2009 as it shifts to alternative accounts and diversifies reserves. Analysts cite geopolitical concerns, de-dollarization efforts, and market fluctuations as key factors.
China’s U.S. Treasury holdings have fallen to their lowest level since 2009, as the country shifts to less visible accounts and reduces reliance on the U.S. financial system.
According to a Financial Times report, Chinese entities cut their U.S. sovereign debt holdings by $57 billion to $759 billion. While China also holds bonds from other nations, the report did not disclose specific figures. Analysts suggest Beijing is withholding details on its Treasury assets.
Brad Setser, a senior fellow at the Council on Foreign Relations, noted China sees holding U.S. debt as a risk.
“China made a decision around 2010 that holding Treasuries was a risk. It looked bad optically that so much of China’s wealth was in the hands of a geopolitical rival,” Setser is quoted as saying.
Some of China’s holdings may have moved to securities depositories like Euroclear in Belgium and Clearstream in Luxembourg, the report says.
This reduction coincides with rising de-dollarization efforts among Global South nations. Other contributing factors include diversifying reserves, reducing U.S. dollar exposure, and geopolitical tensions.
Meanwhile, Mark Sobel, U.S. chair of the Official Monetary and Financial Institutions Forum, argued the drop could be influenced by fluctuations in bond market value.
“Whether they have reduced overall dollar holdings I don’t know, but they are definitely investing in a broader array of instruments through different vehicles,” Sobel said.
