China has reduced its holdings of U.S. Treasuries to their lowest level in 16 years, amid ongoing trade tensions with the United States. In April, China's U.S. Treasury stockpile fell to $757 billion, marking a decline of $8.2 billion from the previous month. This reduction represents the second consecutive month of decline and brings China's holdings to their lowest level since March 2009, according to the U.S. Treasury Department.
The cutback is seen as part of a broader trend that began during President Donald Trump's first term, with China gradually decreasing its investments in U.S. government debt. In March, China fell to the third position among foreign holders of U.S. debt, following Japan and the United Kingdom.
The decline in China's U.S. Treasury holdings coincided with an escalation in the trade war between the two countries. On April 2, President Trump introduced sweeping reciprocal tariffs, targeting both allies and adversaries. This move caused instability in global markets, leading to a sharp drop in U.S. stocks and triggering sell-offs in both Treasuries and the dollar.
As trade tensions intensified, tariff exchanges between the U.S. and China increased, with duties exceeding 100 percent on both sides. A temporary ceasefire in May rolled back many of these levies, but concerns remain about the conflict's potential impact on financial markets. Analysts have speculated that China might further divest its U.S. Treasury holdings, while Washington could consider delisting Chinese companies from American stock exchanges.
Chinese economists have expressed concerns about the potential weaponization of the U.S. dollar, warning of the risks if Washington were to seize Chinese overseas financial assets. This apprehension parallels actions taken against Russia following its invasion of Ukraine, highlighting the financial vulnerabilities amid geopolitical tensions between the two largest global economies.
