China’s holdings of US Treasury bonds have fallen to their lowest level since 2009, as Beijing continues to diversify its foreign reserves and shift assets into lower-profile accounts. According to data published by the US Treasury on Tuesday, Chinese investors’ reported holdings of US government debt declined by $57 billion in 2024, bringing the total to $759 billion. However, this figure does not account for Treasuries held in offshore custodial accounts, making it difficult to assess China’s true exposure.
According to The Financial Times (FT), analysts believe this decline is part of a broader strategy by China to reduce its dependence on US assets while maintaining access to the global financial system. Some of China’s Treasury holdings are now being funneled through intermediary institutions in Belgium and Luxembourg, such as Euroclear and Clearstream, effectively masking the true scale of Beijing’s investments.
“China made a decision around 2010 that holding Treasuries was a risk, both financially and politically,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former US Treasury official. “It looked bad optically that so much of China’s wealth was tied to a geopolitical rival.”
While China’s reported Treasury holdings have decreased by about $550 billion since their peak in 2011, other countries have seen an increase. The UK’s reported holdings rose by $34.2 billion in 2024, Belgium’s by $60.2 billion, and Luxembourg’s by $84 billion. Japan remains the largest foreign holder of US debt, with over $1 trillion in Treasuries.
Beijing is also diversifying into alternative assets, including gold. The People’s Bank of China (PBoC) has increased its bullion reserves significantly, adding over 15 tonnes in late 2024, making it the world’s third-largest buyer of gold in that period. Gold prices have surged by 12% this year, reflecting heightened demand from central banks seeking stability in a volatile global economy.
Despite the decline in US Treasury holdings, experts caution against interpreting this shift as China abandoning the US dollar altogether. Some analysts believe Beijing is increasing its exposure to other forms of US debt, such as agency bonds, while also adjusting its portfolio in response to market fluctuations.
Mark Sobel, US chair of the Official Monetary and Financial Institutions Forum, noted, “Whether they have reduced overall dollar holdings is uncertain, but they are definitely investing in a broader array of instruments through different vehicles.”
Meanwhile, hedge funds and sovereign wealth funds have been driving a surge in US Treasury holdings in the UK, particularly as part of the “basis trade” strategy, where investors buy US bonds and sell futures to exploit small price discrepancies. Analysts suggest that much of the foreign money flowing into Treasuries via London is coming from the Middle East rather than British investors.
