“Sell America”: China Tells Banks to Curb Exposure to U.S. Bonds

Quick overview

According to official data, China’s holdings of U.S. Treasury bonds have fallen from a historic peak of over $1.3 trillion to around $683 billion.

U.S. Treasury bonds extended their losses after reports emerged that Chinese regulators advised domestic banks to limit and reduce their holdings of U.S. government debt—a move that intensified pressure on global fixed-income markets and the dollar.

The information, cited by sources familiar with the matter, comes amid heightened international volatility and growing questions over the traditional appeal of U.S. assets as safe havens.

In the markets, Treasury yields moved higher, with the benchmark 10-year note approaching 4.25% and 30-year bonds also rising. At the same time, the U.S. dollar index edged lower, reflecting investor reaction to signals of reserve rebalancing and rising perceptions of geopolitical and macroeconomic risk.

Why China Is Limiting Treasury Holdings

According to the reports, Chinese financial authorities advised banks to curb new purchases of U.S. Treasuries and instructed institutions with larger exposure to begin a gradual reduction process.

Although no specific reduction targets or timelines were set, the move was framed as a risk-diversification strategy and a protective measure against potential sharp declines in asset prices.

The recommendation does not directly affect China’s sovereign holdings as a state, but rather focuses on the portfolios of domestic financial institutions.

This shift fits within a broader structural trend: China’s Treasury holdings have been declining steadily in recent years, reaching levels not seen since the 2000s. From a historic peak above $1.3 trillion, holdings have fallen to about $683 billion, reflecting a diversification strategy that includes a greater allocation to gold and other asset classes within its reserves.

A Global Trend

Analysts note that while the guidance to banks is formally framed as risk management policy, it reinforces a broader narrative about the gradual weakening of dollar-denominated asset dominance and the structural rebalancing of global reserve portfolios.

Countries such as India and Brazil have also reduced their exposure to the U.S. Treasury market, suggesting a wider adjustment pattern among major foreign holders.

From a market perspective, weaker external demand for Treasuries could put upward pressure on long-term yields and force domestic investors, funds, and central banks to absorb a larger share of U.S. debt issuance.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

Related Articles