China has advised some of its biggest banks to limit purchases of US Treasuries and urged those with high exposure to pare holdings, citing concentration risk and volatility, according to people familiar with the matter.
The guidance was delivered verbally in recent weeks and did not include specific targets on size or timing, the people said. The instruction does not apply to China’s state holdings of US Treasuries.
Treasuries slipped on the report, with yields edging higher across maturities in Asian afternoon trading, while the dollar weakened slightly against major peers.
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Chinese banks held about $298 billion of dollar-denominated bonds as of September, according to State Administration of Foreign Exchange data.
The People’s Bank of China and the National Financial Regulatory Administration did not immediately respond to requests for comment.
This comes after reports of China’s US Treasury holdings falling about $680 billion, described as an 18-year low, alongside a stated rise in gold reserves to near 74 million ounces. The pairing is being framed publicly as a deliberate rotation out of US paper into bullion.
The new guidance was communicated before President Donald Trump’s phone call with President Xi Jinping last week, the people said. Trump plans to meet Xi at a presidential summit in Beijing as soon as April, and the note comes after relations steadied following a trade truce last year even as broader tensions remain.
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Safe haven versus market tape
The advisory lands amid rising investor debate over Washington’s fiscal discipline and questions about Trump’s commitment to a strong dollar and the continued independence of the Federal Reserve. Trump said in late January that he was comfortable with the dollar’s recent decline, which pushed the currency to its lowest level since early 2022, alongside lower rates and mounting fiscal-risk concerns.
US Treasury Secretary Scott Bessent countered the “popular narrative” last week, saying the Treasury market delivered its best performance since 2020 last year and saw record foreign demand at auctions. After a brief selloff around Trump’s tariff announcement last April, Treasuries outperformed most developed-market peers as Federal Reserve rate cuts pushed yields lower.
A measure of Treasury volatility fell to a five-year low, and official data show foreign holdings of US Treasuries rose to a record $9.4 trillion in November, more than $500 billion higher than a year earlier.
China’s overall state and private sector Treasury holdings have declined over the past decade, with China overtaken by Japan in 2019 and by the UK last year. One dataset cited places China’s Treasury stockpile at $683 billion in November, nearly half its 2013 peak and the lowest level since 2008.
The caution on Treasury exposure comes as global markets saw sharp swings this year, including gold surging and then posting its biggest decline in four decades, Japan’s government bond market suffering a $41 billion meltdown, and wide fluctuations in the dollar and yen.
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