Recently, the U.S. Treasury Department released the July 2025 International Capital Flow Report showed that China reduced the holding of $ 25.7 billion (about RMB 18.29 billion) of U.S. government bonds in that month, and the holding scale fell to $ 730.7 billion, a new low since 2009.

At the same time, the People's Bank of China has increased its gold holdings for 10 consecutive months.

Chinese flag and American flag data map

China continues to reduce U.S. debt holdings

The dollar index has fallen more than 10 percent since Trump took office.

This is China's fourth reduction in U.S. debt holdings since 2025.By the change in U.S. debt holdings, China's reduction trend has continued for years.Since the holdings fell to $1 trillion in April 2022, the pace of holdings has continued, and in 2022, 2023, and 2024, respectively, the holdings have decreased by $17.32 billion, $50.8 billion and $57.3 billion.

Since 2025, China's efforts to reduce the holding of U.S. debt have increased, and in the course of the year the holding of warehouses showed the trend of "increasing and reducing holding exchange, reducing holding as the main", in January, the increase in holding of $ 1.8 billion, in February, the increase in holding of $ 23.5 billion, in March to May, respectively, the reduction in holding of $ 18.9 billion, $ 8.2 billion, $ 900 million, in June, the small increase in holding of $ 100 million, in July, the significant reduction in holding of $ 25.7 billion, the holding of warehouses and the scale of innovation is low.

It is worth noting that among the top three overseas creditors of U.S. debt in July, Japan and the United Kingdom chose to increase holdings, and China's reduction of holdings is especially prominent.

According to the first financial report, the chief economist of the People's Bank of China Wangbin said that since this year, the US tariff policy has triggered market panic, and the financial situation of the United States is also widely concerned by the international community, the US bonds, especially the long debt, are sold, while the sale of European long debt has also affected the US bond market.

China's large-scale reduction of U.S. debt holdings data map

Jiang Xinglong, an assistant researcher at the Chinese Academy of Social Sciences Financial Research Institute, also said that the main reasons for China¡¯s reduction in U.S. debt can be summed up in the fact that Trump¡¯s foreign tax hikes, domestic tax cuts and expansion of spending, and the Federal Reserve¡¯s independence are questioned, which seriously damages the dollar¡¯s credit.

According to Nanfang Daily, "the debt of the US federal government has climbed to 37 trillion dollars, and the annual debt interest expense alone exceeds 1 trillion dollars. Together with the 'Great Beauty Act' passed by Trump some time ago, the debt of the US federal government will increase by an additional 2 trillion dollars in the next 10 years." Yang Delong, chief economist of Qianhai Open Source Fund, pointed out. As the U.S. fiscal deficit expands, the risk of monetary policy being fiscally tied becomes more and more obvious. "Once the Federal Reserve excessively monetizes the deficit, the credit of the U.S. dollar may be greatly weakened, and there may even be a risk of'paper money '."

¡°The reduction of interest rates will trigger a decline in U.S. debt interest rates, the market confidence in U.S. dollar assets will shake, and some countries and investors will accelerate the ¡®de-dollarization¡¯.¡± ¨C East Wu Securities Research Institute securities analyst Luo Xue noted that the U.S. dollar index has shown a weakening trend.

Yuan Tao, chief analyst of macro strategy at Orient Securities Futures, also reminded that the market currently underestimates the depth of politicization of the Federal Reserve. "Especially after the end of Powell's term in 2026, the pressure of overall monetary policy shift may further intensify. The medium and long-term weakness of the US dollar will be more obvious."

Since the beginning of Trump's new term, the U.S. dollar index has continued to fall, and has fallen by more than 10% so far.

U.S. dollar index continues to fall

Central Bank increases gold holdings for 10 consecutive months

The reduction in holding of U.S. debt is in response to the continued increase in the Chinese central bank¡¯s gold reserves.

According to data released by the People's Bank of China, China's gold reserves at the end of August amounted to 7,4 million ounces, up 60,000 ounces compared with the 73,9 million ounces at the end of July, which is the 10th consecutive month of increased holding of gold.

According to China Business News, Dong Ximiao, chief researcher of China Merchants Union and deputy director of Shanghai Finance and Development Laboratory, told reporters that gold, as a non-sovereign credit reserve asset, is not affected by unilateral sanctions and can effectively hedge the single currency risk of the US dollar. Optimize the structure of foreign exchange reserves. Against the background of increasing global economic uncertainty and continued weakening of US dollar credit, the allocation value of gold as a strategic reserve continues to increase; In addition, gold has high liquidity characteristics, which can be used as a stable guarantee for the international payment system and help to enhance the credit of sovereign currencies. "My country's central bank's continuous increase in gold holdings will help further optimize my country's foreign exchange reserve structure and also help enhance the international market's confidence in the RMB."

Regarding the phenomenon of China's gold reserves increase for the 10th month in a row, Qingxian information researcher Cao Cao said in an interview with reporters that China's gold reserves are still far below the scale of the developed economies reserves, the continuous increase in the driving role on the international gold market price is actually not significant.

From the reserve structure point of view, China¡¯s gold distribution still has much room for improvement.The data from East China¡¯s statistics show that by the end of August 2025, the share of gold in China¡¯s official international reserve assets (mainly made up of foreign exchange reserves and gold reserves) was 7.3%, significantly below the global average of about 15%.

Wang Qing, chief macro-analytic analyst, predicted that central bank holding of gold is still in the big direction. From the perspective of optimizing the international reserve structure, the future needs to continue to increase the gold reserves and moderate reduction of holding of U.S. debt; at the same time, gold is widely accepted in the world as the final means of payment, central bank holding of gold can enhance the credit of sovereign currency, and create favorable conditions for steadily advancing the internationalization of the RMB.

The gold purchase boom of global central banks further confirms the strategic value of gold. According to the report of the World Gold Council, the global official gold reserves increased by 166 tons in the second quarter of this year, which is at a historical high. From 2022 to 2024, the annual gold purchases of global central banks will exceed 1,000 tons for three consecutive years. 95% of the central banks surveyed expect the global official gold reserves to increase in the next 12 months, and 43% of the central banks said they would also increase their gold holdings.

(Declaration: The contents and data of the article are for reference only and do not constitute investment advice.

Edited | | |Duan Lian Du Bo

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