Chinese regulators have urged major financial institutions to curb their exposure to U.S. Treasuries, citing concerns over concentration risk and market volatility, Bloomberg reported, citing people familiar with the matter.
Officials advised banks to limit new purchases of U.S. government bonds and asked institutions with large existing positions to gradually reduce their holdings, the sources said. The guidance, delivered in recent weeks to some of the country’s largest banks, does not apply to China’s state holdings of U.S. Treasuries.
Chinese banks held about $298B in dollar-denominated bonds as of September, according to data from the State Administration of Foreign Exchange, though the share made up of U.S. Treasuries remains unclear.
China’s overall holdings of US Treasuries have declined steadily over the past decade. Once the largest foreign holder of US government debt, China was overtaken by Japan in 2019 and by Britain last year, with its holdings falling to about US$683 billion in November, Bloomberg reported.
Foreign holdings of US Treasuries nevertheless rose to a record US$9.4 trillion in November, more than US$500 billion higher than a year earlier, according to official data cited by Bloomberg.
