By Christos Christodoulou-Volou*
A development of significant geoeconomic and geopolitical weight has been unfolding in recent months, though it has not yet received the attention it arguably deserves. China is steadily reducing its exposure to US public debt, bringing its holdings of US Treasuries to their lowest level since 2008. This is not a technical or short-term adjustment. It is a strategic and political choice with implications that extend well beyond bond markets.
According to data from the US Treasury Department, China’s holdings of US Treasuries declined to $688.7 billion in October, down from $700.5 billion in September. This marks the lowest level of Chinese ownership of US debt since November 2008. Compared with the historical peak of roughly $1.32 trillion in 2013, the reduction now exceeds 47 percent.
The trend is not new. It began during Donald Trump’s first presidential term, when trade tensions and the deterioration of Washington–Beijing relations prompted China to reassess its financial dependence on the United States. In March 2024, China slipped to third place among the largest foreign holders of US Treasuries, behind Japan and the United Kingdom, a move heavy with symbolism.
In 2025, the pattern not only continued but intensified. Concerns about the sustainability of US debt have grown sharply, particularly after the passage of the costly “One Big Beautiful Bill” last summer and amid political pressure on the Federal Reserve to lower interest rates. For Beijing, these developments point to rising risk.
Gold reserves on the rise
Alongside the reduction in US bond holdings, China has pursued a consistent strategy of increasing its gold reserves. In November, Beijing purchased gold for the 13th consecutive month, adding 30,000 ounces. Total Chinese reserves now stand at 74.12 million ounces, valued at approximately $310.6 billion. The message is clear: gradual diversification away from the dollar and reinforcement of hard reserve assets.
This strategic rebalancing carries layered consequences.
First, it challenges, albeit indirectly, the narrative of US Treasuries as the ultimate safe asset. While the dollar remains the dominant global reserve currency, the gradual withdrawal of one of the United States’ largest creditors over the past decades serves as a warning signal to international markets.
Second, it may raise US borrowing costs over time. If other large countries or institutional investors follow China’s path, demand for US debt could weaken, pushing yields higher. At a moment when deficits and public debt are already at historic highs, such a shift would constrain Washington’s fiscal flexibility.
Third, it feeds into the broader, albeit gradual, process of global de-dollarisation. China is not acting alone. Together with other BRICS countries and emerging economies, it has sought to promote a more multipolar monetary order in which the dollar is no longer the sole reference point. The pivot toward gold and alternative assets fits squarely within that strategy.
A changing composition
It is important to note that overall foreign holdings of US Treasuries remain elevated. In October they stood at $9.243 trillion, slightly down from $9.248 trillion in September, but above the $9 trillion mark for the eighth consecutive month. The composition, however, is shifting. Japan increased its holdings to $1.2 trillion, while the United Kingdom raised its position to $877.9 billion. For now, the gap left by China is being filled by others.
The more critical question is not who is buying US debt today, but who will buy it tomorrow. China’s strategy suggests that Beijing is preparing for a world of heightened uncertainty, in which economic power is tied less exclusively to the dollar and more to tangible reserves and diversified financial networks.
The decline in China’s US Treasury holdings is not merely a financial statistic. It is a political signal and a strategic repositioning that may foreshadow deeper shifts in the global financial system. As with many structural changes, the full implications may only become visible when they are too significant to ignore.
Associate Professor of Economics and Finance and Head of the Department of Economics and Management, Neapolis University Pafos