China’s officially recorded holdings of U.S. Treasury securities fell to $591 billion in August, down from $700 billion a year earlier and their lowest level in 18 years. Once the largest holder, China still owned $1 trillion in April 2022. Yet the apparent retreat may exaggerate the reduction in its actual exposure: Treasury data are collected primarily from U.S.-based custodians and broker-dealers, and securities held through overseas custody accounts are not always attributed to their ultimate owners.
Over the past five years, Treasury holdings attributed to Canada climbed from $169 billion to $465 billion, while Belgium’s rose from $228 billion to $490.5 billion. Those increases have fueled suspicions that some Chinese assets are being held elsewhere. 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 U.S. financial assets still represent 50% to 55% of China’s reserve portfolio, despite a shift from long-term Treasuries toward short-term bills.
The uncertainty comes amid competing pressures. U.S. sanctions against Russia following its 2022 invasion of Ukraine encouraged central banks to diversify toward alternatives such as gold, while President Donald Trump’s trade war gave Beijing further reasons to reduce U.S. exposure. Nevertheless, China’s trade surplus reached a record $1.2 trillion in 2025 and $938 billion during the first nine months of 2026. Those surpluses must be invested somewhere, potentially including U.S. securities held through foreign custodians.
