Chinese regulators have reportedly verbally urged the country's banks to reduce their exposure to US Treasuries, citing concentration risks and increased market volatility. The information was reported by Bloomberg, citing sources with knowledge of the developments.
According to the report, officials asked banks to limit new purchases of U.S. government debt and reduce positions deemed too large. The recommendation, however, does not apply to China's sovereign foreign exchange reserves invested in U.S. bonds.
Concerns about risks and volatility
The directive, which was verbally conveyed to some of the biggest banks in recent weeks, reflects Chinese authorities' concern that large exposure to US debt could expose them to sharp market fluctuations.
The move is presented as a measure of risk diversification rather than a geopolitical maneuver or an indication of a loss of confidence in the creditworthiness of the United States. At the same time, no specific target or timetable has been given for the reduction in positions.
Focus on the US-China relationship
This development comes at a time of relative stabilisation in US-China relations following last year's trade truce, although tensions remain.
Chinese banks held about $298 billion in dollar-denominated bonds in September, according to data from the China Foreign Exchange Administration, though it is not clear how much of that amount is for U.S. Treasury bonds.
Historically high demand for US bonds
On the US side, Treasury Secretary Scott Bessend said that the US bond market recorded its best performance in 2025 since 2020, with record demand from foreign investors at the auctions.
According to official data, total non-US holdings of US Treasury bonds reached $9.4 trillion in November, up more than $500 billion from a year earlier.
Gradual reduction of Chinese participation
China's overall exposure to US bonds has declined significantly over the past decade. The country, once the largest US creditor, was overtaken by Japan in 2019 and by the UK in 2024.
The stock of Chinese placements has almost doubled from its 2013 high, reaching $683 billion in November, the lowest level since 2008.