China Drops US Debt to 17-Year Low, Ramps Up Gold Reserves

China has cut its holdings of US Treasury securities to a 17-year low, reducing its stake to USD 682.6 billion in November 2025 from USD 688.7 billion in October, according to US Department of the Treasury data. This marks the lowest level of Chinese US debt holdings since 2008, as Beijing seeks to diversify its foreign exchange reserves amid unsettled ties with Washington.

The reduction comes even as foreign ownership of US debt reached record highs, with Japan and the United Kingdom increasing their holdings. Japan’s US Treasury holdings rose to USD 1.2 trillion, up USD 2.6 billion, while the UK’s holdings climbed by USD 10.6 billion to USD 888.5 billion, underscoring the shifting global demand for American debt.

China, which maintains the world’s largest foreign exchange reserves at USD 3.3579 trillion, is reallocating its assets toward safer and more diversified instruments. Experts say this strategy emphasizes gold, overseas equities, and non-US currencies to reduce exposure to US debt risks. “This helps strengthen the overall safety and stability of China’s portfolio,” said Xi Junyang, professor at Shanghai University of Finance and Economics.

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Shao Yu, chief economist at Fudan University, noted that Beijing is wary of the unsustainable trajectory of US debt, likening it to a “Ponzi scheme” where new debt replaces old. “China doesn’t want to play this game anymore,” he told the South China Morning Post, highlighting strategic concerns behind the sell-off.

Alongside trimming US debt, China has steadily increased its gold reserves. By the end of December 2025, the People’s Bank of China reported holdings of 74.15 million ounces, up 30,000 ounces from the previous month, marking the 14th consecutive month of growth. Analysts say this is part of Beijing’s effort to bolster the stability and risk-resilience of its reserve assets.

Observers note that while gold’s share in China’s forex reserves remains below that of other major economies, continued accumulation signals a long-term hedging strategy. By diversifying away from US Treasuries, China aims to enhance economic security and safeguard its massive foreign exchange holdings amid global uncertainties.

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