China Urges Banks To Cut US Treasury Holdings, Shuns Trade

Chinese regulators have directed state-run banks to curtail their US Treasury bond holdings, a strategic shift that contrasts sharply with India‘s recent pivot toward a new trade agreement with the United States. This guidance, issued in early 2026, aims to mitigate exposure to sharp asset price swings and concentration risks.

China-urges-banks-to-limit-holdings-of-us-treasuries-citing-market-volatility?srnd=homepage-asia”>Bloomberg reported that the BRICS nation is urging banks to pare down existing positions. Consequently, a global debate is brewing among central banks about the role of US debt in national reserves.

Meanwhile, fund managers worldwide are similarly looking to reduce their US dollar-denominated debt exposure. Their primary motivation is risk diversification, not fundamental policy disagreements or geopolitics.
Data from the State Administration of Foreign Exchange shows China holds nearly $298 billion in US dollar assets. However, the exact Treasury portion remains undisclosed by the People’s Bank of China and the National Financial Regulatory Administration.

Global investor anxiety is compounded by Washington’s soaring national debt, which is racing toward $40 trillion. The US dollar has also weakened significantly, with the DXY index struggling above 100.

This decline prompted former President Trump to indicate he was comfortable with the dollar’s fall, brushing off concerns. Therefore, China and other nations are proactively scaling back Treasury holdings to initiate damage control.

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