China’s US Treasury holdings have dropped to 2009 levels after its central bank sold more than $8 billion in the month of April.
According to a new update from the Treasury Department, China held $757.2 billion worth of Treasuries at the end of April 2025 – down from $765.4 billion in March and $784.3 in February.
In financial markets, timing is everything—for government policymakers as much as investors. So when word leaked this week that Chinese regulators were urging domestic financial institutions to limit their purchases of US Treasuries—and telling those with large exposures to reduce their positions—one question jumped out: why now? After all, the leak came at a time when this guidance had reportedly already been in place for weeks.
One major clue may be that the news broke on Bloomberg less than one week after Qiushi, a leading Chinese Communist Party journal for disseminating official views, published a 2024 speech by President Xi Jinping calling for the internationalization of China’s currency. Either development coming to light at this particular moment could be coincidental, but both surfacing within a single week are too conspicuous to ignore—especially amid what’s currently happening in Washington and New York.
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.
Why China is tightening controls on overseas stock trading
The move has already rattled brokerages and investors, and could reshape how mainland Chinese access foreign market
Published Tue, May 26, 2026 · 12:17 PM — Updated Wed, May 27, 2026 · 05:44 AM
The CSRC is leading the effort, along with the National Financial Regulatory Administration, which handles consumer protection and supervises banks. PHOTO: BLOOMBERG
CHINA’S efforts to control capital outflows are colliding with growing demand from mainland investors for access to overseas stocks.
After an estimated US$1 trillion of unauthorised money left the country last year, authorities launched a sweeping crackdown on offshore trading platforms accused of helping investors bypass Beijing’s capital controls.
The move has already rattled brokerages and investors, and could reshape how mainland Chinese access foreign markets.
Individuals are subject to a US$50,000 annual cap on US dollar purchases, primarily intended for overseas travel, education and other non-investment purposes.
Local citizens and companies also face restrictions around converting renminbi into foreign currencies to trade securities overseas. Mainlanders are only able to invest overseas through special channels with stringent government oversight, such as the Southbound Stock Connect and the Wealth Connect programmes, which are designed for investment in certain stocks and other financial products in Hong Kong.
Another channel, the Qualified Domestic Institutional Investor programme, allows mainlanders to invest in global markets through mutual funds, while cross-border total return swaps are often used by institutions to trade overseas securities through brokers. Retail investors also have direct access to certain Hong Kong-listed shares through the Mainland-Hong Kong Mutual Recognition of Funds scheme.
Besides from using those approved channels, any overseas trading without approval from the China Securities Regulatory Commission and other regulators is considered illegal, and that’s the target of the latest crackdown.
How is Beijing cracking down on illegal overseas trading?
Since 2022, unauthorised overseas brokers have been banned from helping mainland Chinese investors open new trading accounts.
On May 22, eight government agencies launched a joint enforcement campaign threatening severe penalties for brokers that violated the rules. Authorities also barred such firms from engaging with onshore clients across the business chain, including marketing, fund settlements, and technical and customer support.
The CSRC is leading the effort, along with the National Financial Regulatory Administration, which handles consumer protection and supervises banks. The People’s Bank of China, the nation’s central bank, is also involved, as are the country’s Internet and information technology agencies.
Already three of the biggest, most active brokers in this space have been targeted in the crackdown: Futu Holdings and Long Bridge Securities, which are based in Hong Kong, and Singapore-based Tiger Brokers. The firms were fined a combined US$330 million for operating on the mainland without a license, and all “illegal gains” would be confiscated, the regulators said.
As a result of the crackdown, existing mainland clients can only sell positions and withdraw funds from banned brokerages; no new purchases or deposits are permitted. After two years, all related mainland-facing websites, apps, and servers must be fully shut down.
For now, Chinese nationals with permanent residency in Hong Kong and Singapore and those with investor or work visas are not being forced to close their trades.
Why is China cracking down on illicit overseas trading?
Illegal channels have allowed investors to circumvent China’s capital controls, which are designed to keep currency fluctuations in check and maintain financial stability. As with most economies that manage cross-border flows, China is wary of asset bubbles and the sharp crashes that often follow.
May 2026, Japan starts reducing its exposure to funding US debt:
Japan, China lead foreign government retreat from US Treasurys as Iran war fallout stokes currency fears
Story by Anniek Bao
China reduced its stash of Treasurys to $652.3 billion, the lowest level since September 2008.
Japan, the single largest foreign holder, shed approximately $47 billion to $1.191 trillion.
The U.S.-Iran conflict and a subsequent surge in crude oil prices sent currencies tumbling.
China has been gradually reducing its direct Treasury exposure since its peak in 2013, “shadow holding” in custodial countries.
The U.S. Treasury Department building in Washington.
Foreign governments cut U.S. Treasurys in March as the Middle East war forced central banks to liquidate dollar reserves, defending local currencies against an energy shock that sent exchange rates tumbling.
Retired, living in the Scottish Borders after living most of my life in cities in England. I can now indulge my interest in all aspects of living close to nature in a wild landscape. I live on what was once the Iapetus Ocean which took millions of years to travel from the Southern Hemisphere to here in the Northern Hemisphere. That set me thinking and questioning and seeking answers.
In 1998 I co-wrote Millennium Countdown (US)/ A Business Guide to the Year 2000 (UK) see https://www.abebooks.co.uk/products/isbn/9780749427917
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