China Slashes US Treasury Holdings to Lowest Level in 16 Years
China has significantly reduced its holdings of United States government debt. The country now holds the smallest amount of US Treasuries in nearly two decades. This move highlights a clear shift in how China manages its massive foreign exchange reserves.
Data from the US Department of the Treasury reveals a steady decline. In November, China's holdings dropped to $682.6 billion. This figure is down from $688.7 billion in October. It marks the lowest point since the global financial crisis of 2008.
Strategic Diversification Away from the Dollar
Analysts point to a deliberate strategy behind this reduction. Beijing appears determined to diversify its reserve assets. Concerns over geopolitical tensions with Washington play a key role. There are also long-term worries about the sustainability of American public debt.
"The decrease is a result of increased optimisation and diversification of holdings," said Xi Junyang, a professor at the Shanghai University of Finance and Economics. He told the Global Times that this helps strengthen the overall safety and stability of China's investment portfolio.
China possesses the world's largest foreign exchange reserves, totaling $3.3579 trillion at the end of December 2025. Managing this vast wealth requires careful planning.
Other Nations Increase Their US Debt Exposure
Interestingly, China's pullback comes as overall foreign ownership of US debt hits a record high. Key American allies have stepped in to fill the gap.
- Japan raised its holdings by $2.6 billion, reaching $1.2 trillion.
- The United Kingdom increased its exposure by $10.6 billion, bringing its total to $888.5 billion.
This contrast underscores the unique position China is taking in the global financial landscape.
Gold Buying Accelerates as a Safe Haven
Alongside selling US debt, China has been actively purchasing gold. The precious metal serves as a traditional hedge against economic and political shocks.
The People's Bank of China has been steadily adding to its gold reserves. By the end of December 2025, reserves reached 74.15 million ounces. This was an increase of 30,000 ounces from the previous month.
Remarkably, this marked the 14th consecutive month of gold accumulation by the Chinese central bank. Experts believe this trend will continue.
Professor Xi Junyang noted that gold still forms a relatively small share of China's reserves compared to other major economies. He suggested the central bank will likely keep buying to improve resilience against global market volatility.
Experts Voice Concerns Over US Fiscal Health
Chinese economists are openly critical of US fiscal policy. Shao Yu, chief economist at a research centre at Fudan University, offered a stark analogy.
"The massive accumulation of debt resembles a Ponzi scheme," he told the South China Morning Post. "Larger volumes of new debt are used to replace the old. China doesn't want to play this game anymore."
This sentiment reflects a growing wariness in Beijing. The strategy seems clear: reduce reliance on dollar-denominated assets and build a more balanced, secure reserve portfolio for the future.
