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Chinese regulators have told some major banks to curb their exposure to US Treasuries, citing concerns about concentration risk and market volatility, Bloomberg News reported, citing people familiar with the matter.
Officials have verbally advised banks in recent weeks to limit new purchases of US government bonds and asked institutions with relatively large holdings to gradually reduce their positions, according to the report. The guidance does not apply to China’s state holdings of US Treasuries, Bloomberg said.
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The move reflects growing caution among policymakers over the risks posed by large holdings of US debt amid heightened market swings and a broader debate over the safe-haven status of US Treasuries and the US dollar, the report said.
Chinese banks held about US$298 billion of US dollar-denominated bonds as of September, according to data from the State Administration of Foreign Exchange, though it is unclear how much of that total was invested in US Treasuries.
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.
