In the eight months after the Trump administration came to power, there was still a bunch of “problems” on the U.S. side, especially the U.S. debt issue is still unresolved. While Trump was expanding the budget this year, he still needed to repay a lot of debt interest, which is already a big thing. In June this year, China’s U.S. debt holding has rarely increased. Although only $100 million, it gave U.S. financiers a lot of confidence that if everything went well, China’s purchase of U.S. bonds would return to the “positive” growth model, for them it was absolutely a lifeblood.
But what the United States didn't expect was that China did not continue to increase its holdings. In July, it significantly reduced its holdings by US $25.7 billion, setting a record for the highest reduction this year. According to the US media, when the tariff friction between China and the United States was the most intense in April, China only reduced its holdings by 8.2 billion dollars. Now, in total, China has reduced its holdings of US debt by 57.3 billion dollars in four months this year, amounting to 382 billion yuan. Why China suddenly and significantly reduced its holdings of U.S. debt? U.S. financial people are also "speculating". However, considering that China and the United States have not yet agreed on tariffs, and Trump's constant demands for interest rate cuts, the global large-scale selling of U.S. debt is also an imminent matter.
In terms of long-term trends, since the holdings fell to $1 trillion in April 2022, China has decreased its holdings of U.S. debt for three consecutive years, reducing the holdings to $17.32 billion, $50.8 billion, $57.3 billion in 2022 respectively, and implementing the holdings four times in 2025 and the large sales in July have pushed this trend to a new high. The core motivation originates in the first place from concerns about U.S. dollar credit risk: the Trump administration's foreign tax increases, domestic tax cuts and expansion policies, overlap the current situation of the U.S. Federal Reserve's questionable independence, seriously weakened the dollar's credit base. The U.S. federal government debt has risen to $37 trillion, annual interest spending exceeds
Meanwhile, China is accelerating the diversification of its foreign exchange reserves and reducing its reliance on single-dollar assets. Data show that the central bank of China has increased gold for 10 consecutive months and gold reserves reached 7.4 million ounces at the end of August, an asset adjustment to hedge the risk of dollar volatility – gold as a non-sovereign credit asset can effectively avoid the effects of unilateral sanctions, becoming an important direction for reserve structure optimization. In addition, the US tariff policy-induced market panic and the continued weakening of the US dollar index (since the start of Trump’s new term has fallen more than 10%) have also reduced the investment attractiveness of U.S. bonds, becoming a direct incentive to increase holding in July.
Following the June acquisition, Britain added US$41.3 billion in July, the holding scale continued to expand, and behind its actions were both pragmatic economic considerations and strategic components. From the economic perspective, the global market uncertainty caused by U.S. customs policy has increased the attractiveness of U.S. debt as a traditional hedge asset, foreign investment holding US$9.15 trillion in July has been high, and the UK's increased holding is exactly the market choice to comply with this need for hedge. From the strategic level, under the framework of U.S. and U.S. special relations, the UK's increased behavior has been interpreted as indirect support for U.S. policy, and Japan jointly formed the economic response to U.S. strategic