Here are three viewpoints, one is correct.
Is China Selling US Treasuries?
That’s what I typed into Google Chrome. Here’s the AI overview that came back.
China has been consistently reducing its U.S. Treasury holdings, with a 9-month selling streak as of early 2026, lowering its holdings to around billion, the lowest level since 2008. Key motivations include diversifying reserves away from the U.S. dollar, geopolitical risk management, and strengthening its currency. Atlantic Council +4 [AC + 4 others]
Key Details on China’s Treasury Sell-off:
Reduced Exposure: China, once the largest foreign holder, is now the third-largest holder of U.S. debt, behind Japan and the UK.
Long-Term Trend: Holdings have dropped from roughly
trillion a decade ago to around
billion, a decline of over 50%.
Recent Actions: Reports indicate that Chinese regulators have advised local financial institutions to limit or reduce their holdings of U.S. debt due to market volatility and “concentration risks,” though this directive reportedly does not apply to state-level holdings.
Market Impact: Despite concerns, the U.S. bond market has largely absorbed the selling due to robust demand from other nations, meaning this has not yet caused a major market crisis.
Diversification Strategy: China is diversifying into other assets, including gold and other foreign currencies, reducing its reliance on the U.S. dollar-based system. Atlantic Council +9 [AC + 9 others]
Why They Are Selling:
Geopolitical Risk: Concerns about the security of holding massive amounts of U.S. debt amid escalating tensions, especially after sanctions placed on Russia’s reserves.
Currency Management: To support the yuan and shift away from a dollar-centric reserve portfolio.
Market Volatility: Concerns regarding the rising interest rate environment and the stability of U.S. debt prices. Atlantic Council +4 [AC+ 4 others]
The Atlantic Council
On February 10, 2026 the Atlantic Council commented China’s warning on US Treasuries—and why its timing matters
Financial market turbulence
Markets have been unsettled by US President Donald Trump’s pursuit of Greenland, the unpredictability of US tariffs coupled with the Supreme Court’s impending ruling on their legality, and uncertainty over the administration’s dollar policy. Over the past month, the so-called debasement trade—selling or hedging dollar assets and buying precious metals—has gained momentum. Trump’s own comments seemingly endorsing a weaker dollar have added to the volatility.
Beijing has likely been watching closely how these developments fit into its long-term strategy. Over the past several years, China has been reported to be reducing its holdings of US Treasuries, falling from the largest sovereign holder to the third largest, behind Japan and the United Kingdom, although some of those sales may simply reflect assets transferred to other Chinese financial institutions and custodians in countries like Belgium. Other governments—including India and Brazil—have also been selling Treasuries.
At the same time, China is actively pursuing the internationalization of its own currency—a strategy aimed at reducing over time the US dollar’s central role as the primary global reserve currency. In a speech this summer, the Governor of the People’s Bank of China, Pan Gongsheng, explicitly stated that multipolarity was the government’s goal, with the dollar no longer playing such an outsized role in both the global economy and the use of financial sanctions. His deputy, Lu Lei, went a step further in December when he doubled down on China’s new cross-border payment systems, which are designed to operate outside Western networks.
A pointed message to Washington
Against this backdrop, how should one read the Chinese policy shift and its recent leak? Amid financial market turbulence, the Chinese government’s outreach to private financial institutions may have been primarily a reminder of the need to hedge at a moment of heightened uncertainty. It may also have been aimed at reinforcing policy guidance as Chinese exporters seek to invest the dollars they have amassed from the country’s massive export surge.
But it’s also possible the leak was intended as a message to Washington—or, more precisely, to Treasury Secretary Scott Bessent—in the wake of his recent comments about China. At a February 5 congressional hearing, Bessent spoke about “rumors of Chinese digital assets,” possibly backed by gold, that could be used to “build an alternative to American financial leadership.” Then, in a February 8 appearance on Fox News, he appeared to blame the current gold price volatility on China. “The gold move thing—things have gotten a little unruly in China,” he said.
Chinese investors have indeed been buying gold aggressively as they seek alternatives to the country’s decimated property market and rock-bottom interest rates. At the same time, the Chinese government has been a net purchaser of gold for the past fifteen months as it diversifies away from dollar-based assets. But China has hardly been alone in stocking up on bullion: JP Morgan estimates that global demand by central banks and investors for gold will average 585 tons per quarter this year.
Bessent’s decision to single out China may not have landed well in Beijing—especially coming so soon after meetings in Davos with his Chinese counterpart, He Lifeng, which reportedly went well. On February 9, Bessent announced “continued constructive engagement between both sides.” If this includes further talks with He Lifeng, they would likely take place ahead of the Trump-Xi summit in April.
But wherever the dust settles in the near term, the longer-term trajectory seems clearer. China’s ambitions to reduce reliance on the dollar will continue, and the Chinese government will keep finding ways to make life a little more difficult for the United States—and the dollar—wherever it can.
Rotation Theory
The Visual Capitalist
The Visual Capitalist comments Ranked: The Biggest Buyers and Sellers of U.S. Debt (2025)
Visual Capitalist Key Takeaways
The UK, Belgium, and Japan were the three largest buyers of U.S. debt from November 2024 to November 2025, each increasing holdings by more than $115 billion.
China reduced its U.S. debt holdings by $86 billion over the same period, leading all countries in net selling.
Despite major shifts among individual countries, total foreign holdings of U.S. Treasuries rose to a record $9.4 trillion.
Are Foreign Investors Really “Dumping” US Treasury Bonds?
State Street Investment Management Asks Are Foreign Investors Really “Dumping” US Treasury Bonds?
While much has been written about the recent “dumping” of US Treasury bonds (USTs) by foreign investors, a reduction of UST holdings by foreign investors has been under way for more than two decades. The rise in the Treasury term premium has temporarily interrupted Treasuries’ ability to serve as a risk-off hedge, but the outlook for Treasury duration risk is nuanced.
Key Points
The recent “Sell America” sentiment has triggered broad-based market volatility, but the key question remains: Does this reflect a temporary sentiment shift, or a longer-term reallocation of global capital?
Despite rising concerns, US Treasuries remain the medium-term safe-haven, with limited near-term scope for foreign divestment.
The tariff-driven sudden selloff appears technical, though amplified by fiscal worries, inflation pressures, and political uncertainties. These factors contributed to a higher term premium.
While the term premium ebbs and flows, often influenced by tactical flows, a true structural “diversification but not divestment” reallocation flow out of US Treasuries would be a gradual, multi-year process.
Our message to investors is that there is no need to panic on foreign “dumping” of Treasuries—many foreign holders are already underweight. Attractive carry and improving technicals could help restore long bonds’ safe-haven appeal.
That said, if US fiscal issues remain unresolved, the term premium could widen further, posing a tail risk to the long end and weakening its role as a duration hedge (not our core scenario, but key tail risk to note).
Foreign Holdings of US Treasuries
Trading Economics: Foreign Treasury Holdings in the United States increased to 9487.10 USD Billion in February from 9289.40 USD Billion in January of 2026. Foreign Treasury Holdings in the United States averaged 6812.21 USD Billion from 2011 until 2026, reaching an all time high of 9487.10 USD Billion in February of 2026 and a record low of 4912.10 USD Billion in September of 2011. source: U.S. Department of the Treasury
Dumping Treasuries
Allegedly, dumping “a reduction of UST holdings by foreign investors has been under way for more than two decades,” even though holding have increased from 4912.10 Billion in September of 2011 to “an all time high of 9487.10 Billion in February of 2026” according to actual Treasury Data.
I would say that’s quite an achievement.
The AI view and the consensus view are essentially the same.
Consensus Nonsense
China Continues Dumping?
China will not continue dumping because it is not dumping at all. Rather, it’s masking what it is doing.
Brad Setser’s View
Brad Setser’s View
Brad Setser: Gonna keep repeating this until it registers — The PBOC may or may not be reducing its real Treasury holdings; it could just be moving out of US custodians .
But the state banks are clearly adding to their dollar portfolios, and thus indirectly funding the global accumulation of US assets.
Kathleen Tyson: These Chinese state banks? Are they buying through Caymans too?
Brad Setser: Have heard they prefer the British Virgin Islands … seriously read the aiddata paper on offshore Chinese lending to advanced economies and remember that the Chinese banking data shows rising claims from Chinese banks on other financial institutions and think a bit about global equilibrium conditions when China’s surplus is big and intermediated through ten state banks.
My view is essentially the same but with a bit more emphasis.
China is (not could be) masking treasuries in State Owned Enterprises (SOEs) and further masking in places like the Caymans, British Virgin Islands, and Belguim.
Pettis and Kathleen Tyson
Mish View
China is masking Treasury holdings in State Owned Enterprises (SOEs)
China is further masking its holdings in the Cayman Islands, British Virgin Islands, Belgium, Bermuda, etc.
As long as the US keeps running trade deficits, foreigners will accumulate US dollars. They recycle those dollars somewhere, usually US treasuries or agencies.
Dumping is impossible in aggregate because someone must hold every treasury issued 100 percent of that time.
Points three and four get to the heart of the matter, not mentioned above.
Mathematically, without dispute, someone must hold every treasury issued 100 percent of that time.
Who is that someone and how can anyone possibly dump them?
China could dump treasuries for gold. But who is the buyer of the treasuries. China could sell buy oil but what does the Mideast do with the dollars?
Every Month, Another Deficit
Meanwhile the US runs a trade deficit with China every month. In doing so, China receives US dollars. What does it do with them?
If China does do something with them, then what does the receiving entity do with them?
This key understanding is why foreign holdings of US treasuries are at a record.
Yet, the consensus view is countries are dumping US treasuries.
Conclusion
There is no Treasury dumping (and mathematically cannot be in aggregate)
The yuan is not about to replace the dollar as a reserve currency
The petrodollar theory makes no sense (and never really did)
Points two and three are discussed in the related posts below.
Related Posts
April 20, 2026: What Does CFR’s Brad Setser Say About Petrodollar Myth and Reality?
“The glory days of the petrodollar are over,” says Brad Setser CFR fellow.
April 25, 2026: Mideast Dollar Funding Panic, Bessent Portrays it as Strength
I was asked to comment on US dollar swap lines to Mideast oil producers.
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