China’s holdings of US Treasuries have fallen to the lowest level since August 2008, amid the growing divergence between the world’s two largest economies, the Financial Times (FT) reported on 17 September.

The value of US government debt held by Chinese investors fell to $618 billion in July, according to data released by the US Treasury.

At its height in November 2013, China held more than $1.3 trillion in US Treasury securities, which finance US government spending.

China built a large position in US sovereign debt in recent decades by investing proceeds from its massive trade surplus. Investing its foreign currency revenues abroad helped keep the value of the yuan low and Chinese exports competitive.

At the same time, investments in US treasuries by China and other countries helped the US run huge fiscal deficits.

However, China and others have begun diversifying into other assets, including gold, US Agency bonds, and stocks.

Agency bonds are mortgage-backed securities guaranteed by the US government that typically pay higher interest rates than treasuries.

China’s falling US Treasury holdings were part of “a global trend of diversification into gold … and agency bonds, as well as other assets like equities, especially with the AI boom,” said Wei Li, head of multi-asset investments for BNP Paribas Securities in China.

Beijing accelerated its sales of US Treasury securities after Washington froze Russian assets following Moscow’s invasion of Ukraine in 2022, fearing the US could take similar action against China.

China’s shift has not been in isolation. Foreign investors now purchase more US stocks than US government bonds, thanks to higher stock market returns from the AI boom, which many view as a bubble.

Investors have also become concerned about the “risk-free” status of Treasuries as US debt climbs to levels increasingly viewed as unsustainable. The US national debt recently reached a record $40 trillion.

Foreign purchases of US stocks averaged 2.8 percent of US GDP in the first half of 2026, compared to two percent for Treasuries.

“China’s move is mostly showing the US they can dump Treasuries,” said Alicia García Herrero, chief economist for Asia-Pacific at investment bank Natixis.

China is now the third-largest holder of Treasuries behind Japan and the UK.

In contrast to China, the UK is expanding its holdings of US Treasuries, which recently reached $1 trillion for the first time.

[…]

Via https://thecradle.co/articles/china-cuts-us-treasury-holdings-to-lowest-level-in-18-years