China cuts U.S. Treasury holdings to 17-year low as reserves shift

China has reduced its holdings of U.S. Treasury securities to roughly $682.6–$688.7 billion in recent months, the lowest level since 2008, official U.S. Treasury data show. The month-by-month snapshots place holdings at $688.7 billion in October 2025 and $682.6 billion in November 2025, marking the continuation of a near-decade decline as Beijing accelerates diversification of its foreign-exchange reserves.

The downward move is part of a broader strategy to rebalance reserve portfolios toward gold and overseas equities. People’s Bank of China disclosures indicate gold reserves reached 74.15 million ounces at end-December 2025, an increase of 30,000 ounces from the prior month and the 14th consecutive monthly rise in reported gold holdings. Analysts and Chinese economists interpret this pattern as deliberate portfolio optimisation aimed at strengthening resilience amid geopolitical tensions.

Jefferies analyst Christopher Wood noted that the October 2025 Treasury figure of $688.7 billion was about $95.5 billion, or roughly 12 percent, below a February 2025 peak of $784.3 billion, and roughly $628 billion, or 48 percent, below the November 2013 peak of $1.32 trillion. The cumulative trend includes earlier declines totaling $334.6 billion between February 2021 and October 2023, followed by a pause in 2024 before fresh reductions resumed.

Chinese academics framed the shift as prudent risk management. Xi Junyang, professor at Shanghai University of Finance and Economics, said the move "strengthens the overall safety and stability of the portfolio" and underscored that the proportion of gold in China’s reserves remains low compared with other major economies, implying further accumulation is likely. Shao Yu, chief economist at the Sci‑tech Innovation Management Research Centre at Fudan University, criticized the scale of U.S. debt accumulation, calling it "a Ponzi scheme" and saying "China doesn't want to play this game anymore," signaling a political as well as financial rationale for the reallocations.

The reallocation has international resonance. In the same U.S. Treasury data cycle, Japan increased holdings by about $2.6 billion to roughly $1.2 trillion and the United Kingdom added $10.6 billion to reach $888.5 billion, underscoring diverging reserve behaviours among major holders. Market participants warn that Treasuries still furnish critical liquidity, making a sudden, large-scale Chinese sell-off unlikely; the more plausible risk for global markets is a steady, deliberate reduction in reliance on dollar-denominated instruments that, over time, could push U.S. borrowing costs modestly higher.

Policy implications are significant. For Beijing, shifting into gold and overseas equities reduces exposure to potential economic coercion and the volatility of U.S. fiscal and monetary policy. For the United States, the trend highlights the structural vulnerability of relying on foreign official buyers to absorb large and persistent fiscal financing needs. For global markets, the change underscores a gradual, multi-year de-risking from dollar-centric assets that will be monitored closely by central banks, sovereign wealth funds, and fixed-income investors.

While the Treasury snapshots give clear, verifiable totals for recent months, they do not provide a full breakdown of China’s entire reserve allocation, leaving gaps in understanding the precise scale and pace of reallocation. Nonetheless, the data depict a notable shift in the composition of the world’s largest official foreign-exchange reserve holdings.