（Singapore, 09.02.2026）China has quietly urged its major banks to cut back on their holdings of US government bonds, reflecting growing concern over market volatility and concentration risks tied to America’s rising debt levels, according to people familiar with the matter.
The guidance, delivered verbally to some of China’s largest financial institutions in recent weeks, encourages banks to limit new purchases of US Treasuries. Those with relatively large exposures have also been advised to gradually reduce their positions. The move does not apply to China’s official state reserves, which remain under separate management.
Officials behind the guidance stressed that the decision is driven by risk management rather than politics. They did not set specific targets for how much banks should reduce their holdings, nor did they provide a fixed timeline. Instead, the message focused on diversification and limiting vulnerability to sharp market swings.
The advice comes at a time when global investors are increasingly debating whether US government debt still deserves its long-held reputation as the world’s safest asset. Large budget deficits, rising borrowing needs, and policy uncertainty in Washington have all added to concerns about volatility in US bond markets.
While relations between Beijing and Washington remain complex, they have been relatively stable following a trade truce reached last year. People familiar with the discussions said the banking guidance was not linked to geopolitical tensions or a fundamental loss of confidence in the US government’s ability to repay its debt.
Market reaction to the news was modest but noticeable. US Treasuries slipped slightly during Asian trading hours, pushing yields higher across several maturities. The US dollar also weakened a little against major currencies, suggesting investors are increasingly sensitive to signs of changing foreign demand.
The timing of the move has attracted attention, as it precedes a renewed round of high-level diplomatic engagement between China and the United States. US President Donald Trump held a phone call with Chinese President Xi Jinping last week and has signaled plans for a possible summit in Beijing as early as April. However, people familiar with the matter told Bloomberg that the regulatory guidance to Chinese banks was issued before the call took place.
Chinese banks held around US$298 billion in dollar-denominated bonds as of September, based on data from the State Administration of Foreign Exchange. It remains unclear how much of that total consists specifically of US Treasuries. China’s central bank and financial regulators have not publicly commented on the matter.
China’s cautious stance mirrors a broader shift among global investors who are increasingly questioning Washington’s fiscal discipline. Concerns have intensified over the US government’s expanding deficits, as well as political pressure on the Federal Reserve and uncertainty surrounding future economic policy.
Some investors are also watching the US dollar closely. Trump has previously signaled that he is comfortable with a weaker dollar, a position that contrasts with the traditional US stance favoring a strong currency. In late January, he reiterated that view, and the dollar subsequently fell to its lowest level since early 2022. Lower interest rates and worries about fiscal sustainability have added to the currency’s decline.
Despite these concerns, US officials and some market participants argue that fears of a mass exodus from Treasuries are overblown. Treasury Secretary Scott Bessent said last week that the market delivered its best performance since 2020 and saw record levels of foreign demand at auctions in the past year.
Indeed, after a brief selloff triggered by tariff announcements last April, US Treasuries have outperformed many other developed-market bonds. Federal Reserve rate cuts have helped push yields lower, supporting prices and reinforcing Treasuries’ appeal during periods of uncertainty.
Measures of market stress also suggest calm rather than panic. Treasury market volatility has fallen to a five-year low, and there is little evidence of large-scale selling by foreign investors. Official data show that foreign holdings of US Treasuries rose to a record US$9.4 trillion in November, more than US$500 billion higher than a year earlier.
That said, China’s overall exposure to US Treasuries has been declining for years. Once the largest foreign holder of US government debt, China was overtaken by Japan in 2019 and by the United Kingdom last year. Its total holdings have nearly halved since peaking in 2013, falling to about US$683 billion in November, the lowest level since 2008.
Some analysts caution that the decline may not be as large as headline figures suggest. China is believed to have shifted part of its holdings to custodial accounts in Europe. Belgium, for example, has seen its Treasury holdings quadruple since 2017, a rise often linked to Chinese custody arrangements.
China’s move to encourage banks to diversify comes amid a year of sharp swings across global markets. Gold prices surged earlier in the year before suffering their steepest drop in four decades. Japan’s government bond market experienced a massive selloff, and major currencies such as the dollar and yen have seen unusually wide fluctuations.
Against this backdrop, Beijing’s message to banks appears to be a cautious step aimed at reducing exposure to sudden shocks, rather than a dramatic shift away from US assets. For now, it underscores a broader trend: even the world’s most trusted financial instruments are no longer being taken for granted.
