China has thrown out $25.7 billion in debt, which also allowed Trump to directly change the personality, and the attitude toward China is no longer tough.
On September 18, the U.S. Treasury released a report. Data showed that in July 2025, China reduced its holdings of $257 billion to $7307 billion, the lowest point since 2009. To know, China was once the largest overseas holder of U.S. government bonds, holding more than $1 trillion once, but now is steadily reducing its holdings for three consecutive years, and the monthly moves are increasing frequently. Meanwhile, Japan and the United Kingdom are steadily increasing their holdings, especially the United Kingdom, with a sharp increase of $413 billion in July, reaching a new high.
So, why did China reduce its holdings of U.S. debt at this time? On the surface, it is the need for diversified allocation of foreign reserves. In recent years, China has continued to increase its gold reserves, and the central bank has increased its gold holdings for ten consecutive months. This shows that China is actively weakening its dependence on US dollar assets and spreading risks to more stable and value-preserving assets. On the other hand, this is not just a financial consideration, but closely related to the game of Sino-US relations. Since the Sino-US friction intensified, China's attitude towards US debt has changed substantially, and it is no longer regarded as a "safe asset".
U.S. government bonds have surpassed $34 trillion in size, interest spending has surged, and fiscal deficits are constantly high. Market confidence in U.S. bonds is increasingly dependent on overseas funds. Although overall, overseas investors are still U.S. bond net purchases in July, if major creditors like China continue to reduce holdings, this confidence must be shaken. In other words, China's holdings are not going to hit the U.S. government bond market directly, but can continue to increase the anxiety of the Trump administration, making it harder for the U.S. to hold on the negotiating table.
It was in this context that Trump’s attitude began to change dramatically. On the same day, when he spoke of China-U.S. relations with Britain and Stammer at the conference, his words were mild enough. He no longer raised the tariff bars, but actively released the signal “I want to extend the tariff suspension period”, and repeatedly stressed “Sino-U.S. relations are good.”
On the one hand, Trump himself is clear that China and the United States have not much to do with it. The U.S. manufacturing industry has not really rejuvenated because of tariffs, but has incurred additional costs in the global supply chain restructuring. While China's resilience is unexpected, trade has not been crushed, instead of accelerating the diversification layout, from Central Asia to the Middle East, from ASEAN to Latin America, China is opening up new markets, weakening its dependence on U.S. exports. If Trump continues to hard, not only domestic price pressure is greater, US agricultural products and aircraft exports to China may also be stuck, which for his subsequent political prospects is no different from the destruction of Long City.
On the other hand, the psychological impact of China’s U.S. debt operations cannot be ignored. The U.S. debt is the U.S. “death door”, once the major overseas holders collectively reduce holdings, the fluctuation of market confidence is enough to make the U.S. government retreat. The scale of China’s upselling of U.S. debt does not count, but at the critical moment appears, the release signals are clear enough, if the U.S. continues to provoke, China can completely pressure the U.S. through financial channels. Trump is not ignoring this, so he must soften the mouth, at least on the surface to show relief.
It is worth noting that Trump’s shift is not just saying in his mouth. At the conference, he said that the United States was willing to continue negotiations with China on tariffs, rare earth, chips, and Boeing aircraft purchases, but also suggested that the tariff suspension period could be extended to the first half of next year. This means that the United States is no longer pushing China to make concessions in the short term, but rather to delay and strive to stabilize the situation first.
In general, Trump in diplomatic occasions like a person changed, the attitude toward China is no longer hard. This is not suddenly a trick, but the reality forced him to make adjustments. In the future, the game between China and the United States, will still be intertwined in many fields such as finance, trade, science and technology, and this time China has proved that the hard-to-hard operation is no longer the only option, the financial means can also play the role of "four or two thousand kilograms".