China, once among the largest foreign buyers of U.S. debt, has cut its Treasury holdings to the lowest level since 2008, underscoring a retreat from financing America’s swelling deficits and highlighting geopolitical frictions in the Trump-led trade war.
Official Treasury data show China sold $26 billion of U.S. government bonds in July, reducing its total to $730.7 billion, the lowest in 17 years. Since February, its holdings have fallen by about $54 billion.
“China [is] dumping Treasuries at a $300 billion annual pace,” said former economics professor Peter St. Onge, describing the scale of the move.
Despite remaining the third-largest foreign holder, behind Japan and the U.K., Beijing’s steady sell-off reflects wider tensions over trade, technology, and currencies. Analysts see the reduction as part of China’s push to lessen reliance on the dollar-based financial system and promote the use of the yuan in global commerce.
Credit Agricole CIB economist Xiaojia Zhi called it “an opportunity to promote RMB internationalization.”
By contrast, Japan and the U.K. added to their U.S. Treasury positions in July, increasing holdings by $4 billion and $41 billion, respectively.
U.S.-China trade tensions are thawing, but there’s a catch
The news comes as signs emerge of a limited thaw in China-U.S. trade relations, with both governments agreeing on a framework to keep TikTok operational in the United States.
President Donald Trump said last week that he and Chinese leader Xi Jinping had approved a framework for a TikTok deal.
While many details remain unresolved, reports indicate that the agreement would require ByteDance to give up controlling interest in TikTok’s U.S. operations, with U.S. investors taking over ownership and governance roles — although the exact structure has not been finalized.
However, progress on the broader — and more contentious — issues in U.S.-China trade remains elusive.
As Politico reports, the two sides remain far apart on key sticking points, including Washington’s push to narrow the trade deficit, expand market access for U.S. companies in China, and ease export controls on Chinese goods.
Mark Busch, a former adviser to the U.S. Trade Representative, said China’s patience has “baffled the administration,” suggesting Beijing has been resilient in the face of ongoing tariff threats.
In the meantime, stock markets are behaving as though the two sides are moving toward a comprehensive deal — or at least that the current trade truce will hold until an agreement is reached. The S&P 500, Dow Jones, and Nasdaq all notched record highs last week.
Part of the market’s optimism reflects a 90-day extension of the tariff truce, agreed on Aug. 12 by Beijing and Washington, which averted another round of tariff hikes.
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