As of April 2025, China holds approximately $759 billion to $761 billion in U.S. Treasury securities, making it the second-largest foreign holder of U.S. debt after Japan. This is a significant reduction from its peak holdings of $1.316 trillion in November 2013.
Potential Effects if China Sells Its U.S. Treasury Holdings
If China decides to sell off its U.S. Treasury holdings, the potential effects could be substantial:
Spike in U.S. Interest Rates: A mass sell-off would flood the market with U.S. Treasuries, depressing their prices and causing yields (interest rates) to rise sharply. Higher borrowing costs for the U.S. government could exacerbate fiscal challenges.
Weakened U.S. Dollar: Selling large amounts of Treasuries would likely weaken the dollar as demand for dollar-denominated assets declines. This could lead to inflationary pressures within the U.S..
Global Financial Shock: The sudden liquidation of such a large asset pool could destabilize global financial markets, given the interconnectedness of economies and reliance on U.S. Treasuries as a safe-haven asset.
Economic Impact on China: Dumping Treasuries would also hurt China by reducing the value of its remaining holdings and potentially destabilizing its own economy due to reduced export competitiveness and financial ripple effects.
Likelihood of a Sell-Off
Despite these risks, such a move is considered unlikely for several reasons:
Mutual Economic Dependency: The U.S.-China economic relationship is deeply intertwined, with China relying on U.S. debt as a safe investment for its foreign exchange reserves and the U.S. benefiting from China's purchase of Treasuries to fund its deficit.
Self-Inflicted Damage: A sell-off would harm China’s own financial stability and trade relations, making it a risky strategy even during heightened tensions.
In conclusion, while the threat of China weaponizing its Treasury holdings exists, it remains a double-edged sword that would inflict significant damage on both economies and global markets
Potential Effects if China Sells Its U.S. Treasury Holdings
If China decides to sell off its U.S. Treasury holdings, the potential effects could be substantial:
Spike in U.S. Interest Rates: A mass sell-off would flood the market with U.S. Treasuries, depressing their prices and causing yields (interest rates) to rise sharply. Higher borrowing costs for the U.S. government could exacerbate fiscal challenges.
Weakened U.S. Dollar: Selling large amounts of Treasuries would likely weaken the dollar as demand for dollar-denominated assets declines. This could lead to inflationary pressures within the U.S..
Global Financial Shock: The sudden liquidation of such a large asset pool could destabilize global financial markets, given the interconnectedness of economies and reliance on U.S. Treasuries as a safe-haven asset.
Economic Impact on China: Dumping Treasuries would also hurt China by reducing the value of its remaining holdings and potentially destabilizing its own economy due to reduced export competitiveness and financial ripple effects.
Likelihood of a Sell-Off
Despite these risks, such a move is considered unlikely for several reasons:
Mutual Economic Dependency: The U.S.-China economic relationship is deeply intertwined, with China relying on U.S. debt as a safe investment for its foreign exchange reserves and the U.S. benefiting from China's purchase of Treasuries to fund its deficit.
Self-Inflicted Damage: A sell-off would harm China’s own financial stability and trade relations, making it a risky strategy even during heightened tensions.
In conclusion, while the threat of China weaponizing its Treasury holdings exists, it remains a double-edged sword that would inflict significant damage on both economies and global markets
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.