China cuts US Treasury holdings for third month amid trade war, debt ceiling fears

Beijing shed more US debt in May as trade tensions flared and Trump’s ‘Big Beautiful Bill’ sparked alarm

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Chinese yuan banknotes are sandwiched between several US dollar bills. Photo: Fernando Gutierrez-Juarez/dpa

Published: 4:00pm, 18 Jul 2025

China trimmed its US Treasury holdings for a third straight month in May, amid escalating trade tensions with Washington and mounting concerns over a sweeping tax and spending bill.

Beijing’s holdings fell to US$756.3 billion from US$757.2 billion in April, according to US Treasury Department data. That was the lowest level since March 2009, based on figures compiled by Wind.

The decline has continued since March, when China dropped to third place among foreign holders, behind Japan and the United Kingdom.

In May, China and the US agreed to a 90-day truce in their unprecedented trade war after talks in Geneva. But tensions soon reignited after Washington announced new export restrictions and Beijing imposed curbs on rare earth exports.

There were fears the trade war could spill over into financial markets amid speculation that Beijing might offload its large US Treasury holdings or that Washington could delist Chinese firms from American stock exchanges.

Lian Ping, chairman of the China Chief Economists Forum, warned in May that while full-scale US financial sanctions against Beijing were unlikely, the sector could still “become a new battleground”.

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