China Orders Banks to Dump U.S. Treasuries Amid Dollar Storm

by

A Dwindling Stockpile

In the quiet arithmetic of power, Beijing speaks through the tremor of ledgers: tell the great banks to loosen their clutch on U.S. Treasuries, not out of whim but to guard the delicate machinery of finance from the dollar’s tremor and the market’s capricious song. The directive, whispered to the citadel of top lenders, is a soft-spoken drama about risk concentration and the wild volatility that visits markets like an uninvited guest. It does not touch the state’s own reserves, yet it aims squarely at the roughly $298 billion of dollar-denominated bonds held by commercial lenders.

Once the United States’ most faithful creditor, Beijing has watched its holdings retreat from a 2013 peak of $1.3 trillion to about $682.6 billion by late 2025-the lowest echo of the crisis-haunted era since 2008. Now China sits behind Japan and the United Kingdom as the third-largest foreign holder of U.S. debt, a position earned through time and now contested by prudence.

Analysts read the move as a sober defense against a weaponized dollar’s reach. Since the freezing of Russian foreign reserves in 2022, Beijing has hurried to build a sanctions-proof citadel. By trimming Treasury exposure, China seeks monetary sovereignty and a decoupling from the Federal Reserve’s capricious rhythm, which lately has chased the yuan with a jitterbug of swings.

Breaking the ‘Dollar Sea’

Moreover, a pivot toward diversification unfolds: gold rises in reserve for fourteen consecutive months, while some Treasury holdings drift into custodial drawers in Europe-Belgium among the quiet custodians-so the true scale of exposure plays hide-and-seek behind a polite smile.

Yet the U.S. Treasury market endures, its foreign ownership a stubborn record of $9.4 trillion. The Bloomberg report nods to fresh lines from US officials, suggesting that as China steps back, other global buyers slip forward to fill the space with equal parts faith and speculation.

The timing, delicate as a winter frost, lands just months before a planned Xi-Trump rendezvous in Beijing. Officially, the move is a matter of market risk diversification; unofficially, it whispers a larger message: the dollar may be comfortable on the throne, but it is not indispensable to a nation’s walk in the world.

“China might be an economic whale, but it tires of swimming in a dollar sea,” sighs a Lowy Institute analyst. “This is a choice to keep the system afloat even if the West’s winds shift.”

FAQ ❓

  • What did China order banks to do? Regulators urged major lenders to trim U.S. Treasury holdings.
  • Why is Beijing reducing exposure? To curb dollar risks, volatility, and potential sanctions.
  • How big are China’s holdings now? They’ve fallen to about $682.6B-the lowest since 2008.
  • What’s the global impact? Other buyers step in as China diversifies with gold and Europe custodial accounts.

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2026-02-09 16:37