LIVE MARKETS-China seems unwilling to accelerate sales of US assets

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CHINA SEEMS UNWILLING TO ACCELERATE SALES OF US ASSETS

China’s call for banks to scale back their holdings of U.S. Treasuries jolted markets last week. But the move seems to fit a familiar pattern of measured portfolio adjustments rather than a shift toward faster dollar‑asset sales.

“Most of China’s U.S. debt sales last year were of short-term securities, which is consistent with forex intervention and liquidity management, not a strategic retreat from U.S. assets,” Leah Fahy, economist at Capital Economics, says.

China’s holdings of U.S. debt have halved since their 2013 peak, and this trend appears to have accelerated since Donald Trump’s second inauguration, Fahy notes.

The U.S. dollar share of Chinese banks’ foreign bond holdings fell by almost 10% between the end of 2024 and the third quarter 2025. China’s holdings of U.S. debt saw their biggest decline in value since the PBOC’s efforts to defend the renminbi in 2016.

“Most of the shift away from dollar-denominated bonds by Chinese banks seems to have been offset by more purchases of other dollar-denominated assets,” she says, noting that the dollar share of total foreign assets fell more gradually last year.

Fahy suspects banks increased purchases of dollar assets recently as the strengthening renminbi has removed the need to sell U.S. assets to defend the currency.

The pressure has been in the opposite direction as the PBOC has been setting a weaker fix for the past two months.

U.S. Treasuries prices slipped briefly last Monday after the China news.

(Stefano Rebaudo)

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