TEHRAN – China recently decided to reduce its investments in U.S. Treasury bonds, shifting its strategy to strengthen financial stability and reduce dollar reliance. 

This shift reflects a change in how China manages its international reserves. Once the largest foreign holder of these bonds, China’s holdings have dropped significantly over the past few years. 

As of November 2025, China held $682.6 billion in U.S. Treasury bonds, a sharp decline from $1.4 trillion in 2013. This decision is part of China’s broader effort to diversify its financial portfolio and reduce reliance on the U.S. dollar.

There are several reasons behind China’s decision to reduce its Treasury bond holdings. 

First, China is working to reduce its exposure to the U.S. dollar. The dollar has become more volatile, and China wants to protect itself from potential risks, like a decline in the dollar’s value. To do this, China has been increasing its investments in assets like gold, foreign stocks, and non-U.S. currencies. 

By December 2025, China’s gold reserves had grown to 74.15 million ounces, showing its commitment to more stable and secure assets.

Another important factor is the growing concern over the U.S. national debt, which has reached a massive $38 trillion. With such a high level of debt, China is cautious about holding too many U.S. Treasury bonds. 

There is always a risk of the U.S. defaulting on its obligations or the dollar weakening because of U.S. fiscal policies. 

China’s decision to reduce its bond holdings is a way to protect its financial interests from these potential risks.
At the same time, China is making efforts to promote the use of its own currency, the yuan, in international trade. 

Beijing is seeking to establish an alternative financial system based on gold reserves and a state-backed digital yuan. This approach aims to reduce reliance on the U.S.-dominated financial system and protect against potential asset freezes imposed by U.S. sanctions. The goal is to diversify China’s international reserves and bolster the use of the digital yuan for cross-border transactions. 

Economic analysts state that by encouraging countries to settle trade in national currencies instead of the U.S. dollar, China aims to create a more stable financial environment. This reduces its dependence on the U.S. dollar, helping China manage economic risks and strengthen its position in global trade.

China’s reduction in Treasury bond holdings also aligns with its broader economic strategy. The country has been increasing its investments in infrastructure, energy, and manufacturing, particularly in regions like Southeast Asia, West Asia, and South America. 

These investments help China secure long-term growth and create stronger trade relationships with emerging economies. By spreading its investments across different regions and sectors, China is better positioned to protect itself from global economic shocks.

However, there are risks involved in reducing U.S. bond holdings. A sudden or large sale of Treasury bonds could cause the yuan to appreciate in value, which could hurt China’s export-driven economy. A stronger yuan would make Chinese goods more expensive, reducing their competitiveness in global markets. 

To avoid this, China has chosen to gradually reduce its bond holdings, carefully managing the impact on the yuan through its monetary policies. This approach allows China to maintain currency stability while minimizing disruptions to its export sector.

China’s decision also comes at a time of rising global uncertainty. By diversifying its reserves and reducing dependence on the U.S. dollar, China is taking steps to ensure its financial stability in an increasingly unpredictable world. While the reduction in U.S. Treasury bond holdings might appear politically motivated, it is primarily a practical and defensive economic strategy. 

The Chinese government is focused on ensuring long-term financial security rather than seeking to challenge global financial systems.

Additionally, the shift is part of a broader trend of selective decoupling between China and the U.S. While the two countries are deeply connected economically, China is taking steps to protect its national security and reduce vulnerabilities in sensitive sectors. This selective decoupling allows China to reduce risks while still maintaining economic growth and stability.

China’s decision to reduce its U.S. Treasury bond holdings is a strategic move aimed at ensuring national economic stability. By diversifying its assets, reducing dependence on the U.S. dollar, and investing in long-term global projects, China is positioning itself to withstand future economic challenges. 

This move reflects China’s focus on securing its financial future in an uncertain global environment, ensuring its economy remains resilient and competitive.