Chinese regulators have issued a new directive to banks.
They have asked large commercial banks to purchase fewer new U.S. Treasuries and gradually reduce their excessive holdings. The reason given is that holding too much money in one place can be risky and increase market volatility.
According to a Bloomberg report, this guidance is only for banks. It will not affect China official or government reserves.
According to sources, this was conveyed to banks verbally. No exact target or time limit was given.
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China Remains Third-Largest Holder
China now holds approximately $683 billion in U.S. Treasuries, placing it third. Japan is next with $1.2 trillion. The United Kingdom is second with $888 billion.
China gradually reduced its investment in 2025. In June, it was approximately $732.7 billion. By November, it had fallen to $682.6 billion.
But the total amount of U.S. Treasuries continued to increase in 2025. At the beginning of the year, it was approximately $9.1 trillion. By November, it had doubled to $9.36 trillion.
Investments by other countries and government institutions remained unchanged. Their total amount remained around $3.92 trillion. Each month, there were only small shortfalls or shortages.
What Does it Mean for the Markets?
If China were to operate US Treasury assets through its commercial banks, it could have an impact on global financial markets.
Rising U.S. Bond Yields
If demand from major buyers like China decreases, interest rates on U.S. Treasuries could fall. Higher interest rates would have to be paid to attract new buyers. This would make borrowing more expensive for the U.S. government and businesses. Home loans and corporate loans could also be affected.
This change could cause market fluctuations, especially in the short term. Investors will again assess risk and invest cautiously. Higher interest rates could put pressure on the stock market, especially for growth companies.
If Chinese banks buy fewer Treasuries, demand for the dollar could also decline slightly. This could weaken the U.S. dollar. A weak dollar could allow some large companies to earn more from outside sources, but the stock market could become volatile again in the short term due to the currency’s upward trend.
Signal for Global Diversification
Selling by commercial banks may not be as large as that of government reserves. But if this selling is continuous or rapid, it could be a signal that China is shifting its investments elsewhere.
This could also cause other central banks and large investors to reconsider their U.S. Treasury investments. If more people also begin to change their holdings, both the bond market and the currency market could fluctuate.
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People Also Ask – U.S. Treasuries:
What are U.S. Treasuries?
U.S. Treasuries are debt papers issued by the U.S. government to obtain money. These include Treasury bills, notes, and bonds.
Why do countries like China hold them?
Treasuries are safe and easily marketable investments. Countries use them to manage their foreign reserves and keep their currency stable.
What do Treasury yields have to do with the market?
When demand for Treasuries decreases, their yield increases. When demand increases, the yield decreases. These yields impact interest rates across the economy, such as home loans and business loans.
