US-China Debt Holdings Decline Sharply Over Past Year

Official data from the US Treasury Department reveals a significant decline in China's holdings of US debt securities over the past year. According to the latest numbers, China now holds just $591 billion in Treasury securities, its lowest level in 18 years and down from $700 billion at this time last year.

This sharp decrease has raised concerns about de-dollarization, with some analysts warning that it could have far-reaching implications for global finance. However, experts have long been skeptical of the idea that China is deliberately dumping US assets, pointing to suspicious jumps in Treasury holdings elsewhere.

The decline in China's US debt holdings began around 2021 and has continued steadily since then. Despite holding $1 trillion in Treasury securities as recently as April 2022, China's current holdings are significantly lower than they were just a few years ago.

The data on China's US debt holdings is collected primarily from US-based custodians and broker-dealers. However, this approach may not accurately reflect the actual ownership of these securities, particularly when it comes to foreign governments like China.

As a result, some analysts have pointed to suspicious increases in Treasury holdings elsewhere, including Canada and Belgium, which have seen significant jumps in their holdings over the past five years.

China's economic policies have undergone significant changes in recent years, driven by various factors including global sanctions and trade tensions. The US imposed sanctions against Russia after its invasion of Ukraine in 2022, prompting central banks worldwide to reassess their reserve portfolios and diversify away from the dollar.

This shift has led some analysts to suspect that China may be secretly accumulating U.S. Treasury debt through non-US custodian banks. One possible location for such activity is Canada, where significant increases in Treasury holdings have been observed over the past five years.

China's economic growth strategy has also contributed to its growing reliance on export-led growth, as domestic demand remains stagnant due to a struggling property market and lingering debt issues. As a result, China posted a record $1.2 trillion trade surplus in 2025, with exports growing at an unprecedented rate.

The country's trade surplus continues to soar, with a staggering $938 billion recorded for the first nine months of 2026. This surge is expected to break last year's record, with some forecasting that China could surpass its own milestone.

China's U.S. Treasury debt holdings have been a topic of interest in recent months. Official data suggests that China has been reducing its stash of long-term Treasuries and increasing short-term bills.

However, research indicates that this may be a deliberate strategy to mask the country's true holdings. By holding some of its Treasuries in custodial centers outside the U.S., such as Canada and European nations like Luxembourg and Belgium, China may be hiding the full extent of its investments.

This complex web of international holdings adds uncertainty to estimates of China's total U.S. financial assets, which are believed to remain between 50% and 55% of its reserve portfolio.