China Curbs U.S. Treasury Exposure As Global Pressure Mounts On Dollar Dominance

By Mansour Al-Maswari

(Albawaba) -- Chinese regulators have instructed major commercial and private banks to limit new purchases of U.S. Treasuries and reduce existing holdings, signaling a cautious recalibration of China’s exposure to dollar-denominated debt, according to sources familiar with the matter.

State holdings, which stood at around $682.6 billion in late 2025, the lowest since 2008, remain unaffected.

The advisory, communicated verbally over recent weeks, is framed by Beijing as a risk-management measure to mitigate concentration risks and market volatility. It also aligns with China’s long-term strategy to diversify reserves, which have declined from a peak of $1.3 trillion a decade ago, amid ongoing U.S.-China trade tensions and fiscal uncertainties in Washington. The move complements Beijing’s push toward gold accumulation and internationalization of the yuan.

The announcement rattled global markets on Tuesday. Treasury yields rose modestly while the U.S. dollar index dropped nearly 1%, reflecting investor concern over reduced foreign demand for American debt.

While Chinese banks account for only a fraction of the $28 trillion U.S. Treasury market, the guidance may amplify “de-dollarization” narratives, boosting interest in alternatives such as eurobonds or yuan-denominated assets. Analysts warn that a significant Chinese sell-off could strengthen the yuan, weaken the dollar, benefit U.S. exports, but increase volatility in global bond markets.

The development coincides with broader international calls for reduced U.S. dollar dependence. Russian Foreign Minister Sergei Lavrov said on Tuesday that the United States is “objectively losing its economic influence” as Global South nations seek alternatives amid sanctions and trade curbs. 

Similarly, French President Emmanuel Macron on February 10 urged the EU to consider joint eurobond issuance for strategic investments, warning that reliance on the dollar exposes markets to U.S. “threats and intimidation” while positioning Europe as a stable alternative.

These moves reflect mounting multipolar pressures on the dollar’s dominance in global finance. While China emphasizes prudence rather than confrontation, the combination of regulatory guidance, declining Treasury holdings, and international advocacy for alternative reserve currencies underscores a potential shift in the global financial order.