China has urged its major banks to curb their exposure to US government debt, citing rising market volatility and increasing financial and geopolitical risks, according to people familiar with the matter. The guidance, reported by Bloomberg, reflects Beijing’s long-running effort to reduce dependence on dollar-denominated assets as uncertainty grows around US fiscal policy and global economic stability.
Over the past decade, China has steadily reduced its holdings of US Treasuries, cutting them roughly in half from a peak of about $1.3 trillion in 2013 to an estimated $650–700 billion today. That decline has seen China overtaken by Japan and the UK as the largest foreign holders of American government debt, with current levels last seen during the global financial crisis in 2008.
According to the report, Chinese regulators have advised major financial institutions to limit new purchases of US government bonds and to scale back positions where exposure is considered high. The guidance is said not to apply to China’s official state reserves, but rather to commercial banks and other financial institutions. As of September, Chinese banks held around $298 billion in dollar-denominated bonds, based on figures from the State Administration of Foreign Exchange, though it remains unclear how much of that total consists specifically of US Treasuries.
The move appears aimed at diversifying risk and insulating China’s financial system from sharp swings in US bond yields. It also comes ahead of renewed diplomatic engagement between Beijing and Washington. Last week, President Xi Jinping held a phone call with US President Donald Trump, following an agreement in October to a one-year trade truce that included easing tariffs and export controls imposed by both sides.
China’s caution reflects broader international concerns about heavy reliance on US assets. Germany’s financial watchdog, BaFin, recently warned that the dollar’s status as the world’s dominant reserve currency could face challenges as early as 2026, citing geopolitical shocks and mounting funding pressures. Those concerns intensified after the Bloomberg Dollar Spot Index recorded its steepest decline since April following Trump’s announcement of sweeping global tariffs.
Despite the turbulence, US officials have sought to project confidence. Trump has dismissed worries over the dollar’s weakness, saying the currency is “doing great” and should be allowed to “seek its own level.” Meanwhile, US Treasury prices fell again on Monday, pushing yields modestly higher as the dollar weakened against major currencies. Treasury Secretary Scott Bessent said last week that the US bond market had delivered its strongest performance since 2020 and attracted record levels of foreign demand at auctions, underscoring the contrasting signals facing global investors.
