China’s officially recorded holdings of US Treasury securities fell to $591 billion in August, an 18-year low, from $700 billion a year earlier. Once the largest foreign holder, China still owned $1 trillion in April 2022. Yet the apparent retreat may not fully reflect its portfolio: US Treasury data rely primarily on domestic custodians and broker-dealers, meaning securities held through overseas accounts may not be attributed to their ultimate owners.
The sharp expansion of holdings elsewhere has reinforced suspicions that China uses foreign custodians. Canada’s recorded Treasury holdings climbed from $169 billion to $465 billion over five years, while Belgium’s rose from $228 billion to $490.5 billion. Brad Setser, a Council on Foreign Relations senior fellow and former Treasury official, considers the evidence particularly strong that China uses a Canadian custodian for some bonds backed by federal housing agencies. He estimates that US financial assets still account for 50–55% of China’s reserve portfolio, despite a shift from longer-term Treasuries towards short-term bills.
China has sought to challenge the dollar’s international dominance. US sanctions against Russia following its 2022 invasion of Ukraine encouraged China’s central bank and others to diversify towards assets such as gold, while President Donald Trump’s trade war added reasons to reduce US exposure. Nevertheless, China’s export-led economy continues to generate enormous trade surpluses: a record $1.2 trillion in 2025 and $938 billion in the first nine months of 2026. Those funds must be reinvested somewhere, potentially including US securities held through overseas banks.
