Chinese regulators have advised major financial institutions to scale back their exposure to U.S. Treasury bonds, citing rising concerns over concentration risk and market volatility, individuals familiar with the matter told Bloomberg.
Officials reportedly instructed banks with significant holdings of U.S. government debt to curb future purchases and reduce existing positions. In recent weeks, the guidance was communicated verbally to some of China’s largest banks and does not apply to the state’s own holdings of U.S. Treasuries.
Sources told Bloomberg that the move is motivated by risk management priorities, not geopolitical strategy or a loss of confidence in the creditworthiness of U.S. debt. No specific targets or deadlines were set regarding the scale or timing of the reductions.
The guidance comes amid growing international scrutiny of the safe-haven status of U.S. Treasuries. Similar concerns were voiced by foreign governments and asset managers in light of continued global financial uncertainty and debates over the dollar’s dominance.
Market reaction was swift: Treasury yields rose modestly during Asian trading hours, while the U.S. dollar slipped slightly against major global currencies. As of September, Chinese banks held approximately $298 billion in dollar-denominated bonds, though it remains unclear how much of that was specifically in Treasuries, according to data from the State Administration of Foreign Exchange.
The regulatory advisory reportedly predates a recent call between Donald Trump and Xi Jinping, with the U.S. president expected to visit Beijing for a summit in April. While tensions persist between Washington and Beijing, bilateral relations have somewhat stabilized following last year’s trade truce.
China clients shift from U.S. assets
On a similar note, last year in April, Chinese clients scaled back their holdings of U.S. Treasuries in favor of European debt, as trade tensions and economic uncertainty under U.S. President Donald Trump prompted a reassessment of overseas investments, according to Deutsche Bank AG. “We have observed some diversification away from the U.S. dollar in Chinese investors’ portfolios,” said Lillian Tao, head of China macro and global emerging market sales, in an interview. She noted that Chinese interest in alternative markets, particularly in Europe, has gained momentum.
Tao highlighted that European high-quality bonds, Japanese government bonds, and gold are emerging as preferred alternatives to Treasuries among Chinese commercial clients investing abroad. The shift comes as dollar-denominated assets experience heightened volatility. Recent turmoil has cast doubt on their status as traditional safe-haven investments, especially amid Trump’s aggressive trade policies.
As the second-largest foreign holder of U.S. Treasuries, China’s investment behavior drew increased scrutiny. U.S. Treasury Secretary Scott Bessent recently dismissed speculation that foreign investors were offloading Treasuries en masse.