US debt worries are voiced by Chinese researchers, as Beijing curbs investments in American debt securities
The United States' national debt continues to set records, prompting growing concerns globally. One of the most significant developments comes from China, which has been reducing its exposure to US dollar assets, particularly US Treasury securities.
According to data, China's US Treasury holdings have dropped to their lowest level since March 2009, amounting to roughly $756 billion as of June 2025. This decrease has been ongoing for three consecutive months, reflecting a cautious approach to balancing economic and monetary priorities amid concerns about the US fiscal situation.
Chinese researchers, including those from the Bank of China, have highlighted worries about the unsustainable growth of US debt and the risks it poses. These concerns have prompted Beijing to trim its holdings of US Treasuries gradually while seeking to diversify reserves into gold, key resources, and strategic materials.
The reduction in China's US Treasury holdings could potentially impact the US economy, given the significant size of these holdings. However, it's important to note that this decrease does not indicate a default by the US at this time.
The concerns have been reignited due to the continued setting of records in the US national debt. Chinese policymakers are taking a strategic approach, aiming to manage risks associated with geopolitical issues, such as potential US sanctions, and bolster their own sovereign bonds.
The move also reflects a broader push to internationalize the renminbi and reduce dollar dominance, including concerns about dollar stablecoins strengthening the dollar's role at China's expense. The publication of these concerns by the Bank of China's researchers is significant, as it suggests a potential shift in investment strategy for China.
The investment in US Treasuries, formerly considered rock-solid, is facing persistent worries over long-term sustainability. The reduction in China's US Treasury holdings may signal a growing unease about the US national debt and its potential impact on the value of these securities.
It's essential to monitor this development closely, as it could indicate a potential shift in global financial dynamics. The People's Bank of China, as the central bank of China, will play a crucial role in navigating these changes and shaping China's future economic strategy.
Sources: [1] The Wall Street Journal [2] Reuters [3] Bloomberg [4] South China Morning Post [5] Financial Times
The reduction in China's US Treasury holdings, amounting to roughly $756 billion as of June 2025, could potentially impact the US economy given their significant size, and it might signal a growing unease about the sustainability of the US national debt. Chinese policymakers are taking a strategic approach, aiming to manage risks associated with the US fiscal situation and potential US sanctions, while also internationalizing the renminbi and reducing dollar dominance.
