US-China trade: China pares US Treasury exposure to 17-year low; steps up gold accumulation
China has pushed its holdings of US government debt down to their lowest level in nearly two decades, underscoring a steady recalibration of its foreign exchange reserves away from dollar assets and towards gold and overseas investments amid strained ties with Washington, PTI reported.Data released by the US Department of the Treasury shows that China’s holdings of US Treasuries fell to $682.6 billion in November, down from $688.7 billion in October, marking the lowest level since 2008.The reduction comes even as overall foreign ownership of US debt touched a record high, with key allies stepping in.
Japan raised its holdings by $2.6 billion to $1.2 trillion, while the UK increased its exposure by $10.6 billion to $888.5 billion, according to the same data.
Strategic diversification underway
Analysts say Beijing’s continued trimming of US debt reflects a broader strategy to diversify reserve assets amid concerns over geopolitical risk and the long-term sustainability of American public debt.China currently holds the world’s largest foreign exchange reserves, totalling $3.3579 trillion at the end of December 2025, official media reported.“The decrease in China’s holdings of the US treasuries is a result of increased optimisation and diversification of holdings of foreign assets seen in recent years, which helps strengthen the overall safety and stability of the portfolio,” Xi Junyang, professor at the Shanghai University of Finance and Economics, told the state-run Global Times.Shao Yu, chief economist at the Sci-tech Innovation Management Research Centre at Fudan University, said Beijing appeared determined to further reduce exposure to US debt as fiscal risks mount.“The massive accumulation of debt resembles a Ponzi scheme, where larger volumes of new debt are used to replace the old.
China doesn’t want to play this game anymore,” he told the South China Morning Post.
Gold buying gathers pace
Alongside the drawdown in US Treasuries, China has been steadily boosting its gold reserves, reinforcing gold’s role as a hedge against external shocks.Latest figures from the People’s Bank of China show that the country’s gold reserves rose to 74.15 million ounces by the end of December 2025, up 30,000 ounces from the previous month.
This marked the 14th consecutive month of gold accumulation by the central bank.Xi Junyang said the central bank is likely to continue increasing gold holdings as part of efforts to strengthen reserve stability and improve resilience against global volatility, noting that gold still forms a relatively smaller share of China’s reserves compared with other major economies.
