According to data released by the U.S. Treasury Department, China’s holdings of U.S. Treasuries fell to $756.3 billion in May 2025, the lowest level since March 2009. The reduction, though modest at less than $1 billion month-over-month, represents the third straight month of net selling, signaling a potential strategic shift in Beijing’s management of its foreign exchange reserves.
Three Consecutive Months of Divestment
China sold approximately $0.97 billion in U.S. government debt in May, following a steep $19 billion reduction in March and an $8.2 billion cut in April. While the May figure is relatively small, the sustained divestment pattern has caught the attention of global bond markets. China remains the second-largest foreign holder of U.S. debt after Japan (which holds about $1.1 trillion), but the consecutive sales suggest a deliberate move to rebalance away from dollar-denominated assets.
The data comes amid ongoing trade tensions between Washington and Beijing. The Trump administration’s tariff policies have directly impacted Chinese exports and fueled uncertainty about future economic relations. Chinese analysts have long recommended reducing exposure to U.S. debt and channeling reserve funds into safer or more strategic assets such as gold, energy commodities, and infrastructure investments.
Weaponization Concerns Remain Unfounded
Despite the three-month selling streak, China still holds a massive $756.3 billion in U.S. Treasuries. This figure contradicts earlier fears that Beijing might “weaponize” its Treasury holdings by dumping them en masse to pressure Washington in trade negotiations. The gradual, measured pace of sales indicates a careful, non-confrontational approach. Nevertheless, the diversification trend is unmistakable: China’s central bank has been purchasing gold for 23 consecutive months as of July 2025, with total reserves reaching an estimated 2,350 metric tons.
Global Shift Away from Dollar Assets
China’s moves are part of a broader global trend. Foreign holdings of U.S. Treasuries as a percentage of total outstanding debt have fallen from 57% in 2008 to roughly 32% today. This reflects growing unease about the U.S. fiscal trajectory, including a national debt exceeding $38 trillion and persistent budget deficits. International investors, particularly from central banks, are diversifying into gold, euro-denominated bonds, and emerging market assets.
The May TIC report also showed that Japan and the United Kingdom slightly increased their holdings during the same period, offsetting some of China’s sales. However, the overall share of foreign demand continues to shrink, pushing the U.S. government to rely more on domestic buyers. Whether this trend accelerates will depend on the outcome of ongoing trade negotiations and the perceived stability of the dollar system.