According to data released by the U.S. Treasury, China’s holdings of U.S. Treasury securities fell to $756.3 billion in May 2025, the lowest level since March 2009. This marks the third consecutive month of declines, following reductions of approximately $19 billion in March and $8.2 billion in April. While the May drop was relatively modest at nearly $1 billion, the cumulative trend is drawing attention from analysts and policymakers alike.
Trade War Pressures Fuel Continued Divestment
The ongoing trade policies of the Trump administration have directly impacted major holders of U.S. debt, particularly China. The latest reduction brings China’s holdings to their lowest since the global financial crisis, signaling a possible recalibration of China’s foreign reserve management strategy. Although China remains the third-largest holder behind Japan and the United Kingdom, its persistent selling—despite not being an outright “weaponization” of Treasury assets—reflects a longer-term diversification effort.
In March, China cut its exposure by nearly $19 billion, dropping from first to third place among top holders. In April, another $8.2 billion was sold. The May data confirms that China is slowly but steadily reducing its dependence on dollar-denominated assets.
Gold and Alternative Assets Gain Favor
Chinese analysts have long advocated for shifting reserves away from U.S. Treasuries toward safer assets like gold. The People’s Bank of China has been steadily increasing its gold reserves, surpassing 2,300 tons by mid-2025. This trend is mirrored by other central banks globally, contributing to a broader “de-dollarization” movement.
Global Treasury Market Undergoes Structural Shift
The U.S. government’s debt management policies are also affecting international confidence. The share of U.S. Treasury securities held by foreign investors has fallen from 57% in 2008 to just 32% in 2025, indicating growing skepticism about America’s ability to manage its spiraling debt. Domestic buyers are increasingly filling the gap, which could push U.S. interest rates higher if the trend continues.
While China’s gradual divestment has not caused immediate market turmoil, it underscores the evolving dynamics of U.S.-China relations and the reshaping of global reserve asset allocation. If trade negotiations deteriorate further, China may accelerate its selling; otherwise, the pace could stabilize. Either way, China’s Treasury holdings will remain a key indicator for global financial markets.