China continues to reduce its holdings of US Treasury bonds in what analysts believe is a carefully planned strategy to weaken the US dollar’s status as the primary reserve currency. This move is seen as part of China’s broader efforts to diminish the United States’ position as the world’s superpower. Despite efforts over 13 years to reduce US Treasury holdings and 17 years of pushing for the internationalization of the Chinese Renminbi, the Renminbi’s status still lags far behind the US dollar.
According to data from the US Treasury Department, the value of US Treasury bonds held by Chinese investors (as recorded by US banks and custodians) dropped to $618 billion in July, the lowest level since August 2008. This represents a decrease of over half compared to the peak of over $1.3 trillion in November 2013.
Renowned Professor Liu Zhaojia from the Chinese University of Hong Kong previously revealed in an article published in the Chinese state media “China Daily” that the true intent behind China’s reduction of US Treasury bonds is to “de-weaponize the US dollar.” As the US and China vie for world dominance, “China not only cannot increase its holdings of US Treasury bonds but should reduce them.”
Over the past 15 years, China has consistently reduced its holdings of US Treasury bonds. From 2011 to 2013, China’s holdings of US government debt reached a historical high of around $1.3 trillion. From 2014 to 2021, China’s holdings fluctuated between $1.1 trillion and $1.2 trillion. Starting in 2022 to 2023, amidst rising interest rates and escalating geopolitical tensions, Beijing began to accelerate its selling pace. From 2024 to 2025, China’s holdings decreased to below $800 billion. In June 2026, China’s holdings of US Treasury bonds fell to $633.4 billion, further dropping to $618 billion in July, placing China’s holdings behind Japan and the United Kingdom.
To weaken the US dollar’s dominance in geopolitical matters, the aforementioned article calls for the “de-weaponization” of the dollar. Reducing dollar assets and promoting the internationalization of the Renminbi are top priorities in Beijing’s agenda.
For example, trade between Russia and China is increasingly settled in their respective currencies; Saudi Arabia considers selling some oil in currencies other than the US dollar; Brazil and China have agreed to trade using their own currencies; Argentina announced using the Renminbi to settle imports from China, and Argentina and Brazil are working toward establishing a common currency; ASEAN has agreed to enhance the use of member countries’ currencies and initiate domestic payment systems; Bangladesh and Russia agreed to pay for a nuclear power plant using the Renminbi, and so on.
However, the US dollar’s global dominance and the political and military supremacy built upon it are unparalleled, and China’s actions have not significantly shaken the dollar’s leading position among global currencies.
Despite China’s economic activities accounting for nearly one-fifth of the global economy, its currency’s share in international payment transactions is only 4%. In contrast, the dollar accounts for 50%. Renminbi assets represent only 2% of global central bank foreign exchange reserves, compared to the dollar’s 58%.
Looking at the share of reserve currencies – a true indicator of a currency’s position in the global financial system – as of July 2024, the Renminbi ranked only sixth, accounting for 2% of all reserve currencies, trailing behind the other four Special Drawing Rights currencies, including the dollar, euro, yen, and pound, and even below non-SDR currency Canadian dollar.
The primary reason for the Renminbi’s low status lies in China’s control over capital flows. Sebastien von Beschwitz, global financial markets regulator at the Federal Reserve Board, pointed out in a 2024 article that Beijing’s exchange rate management and capital controls “continue to limit the Renminbi’s broader usage and attractiveness of its assets,” making the Renminbi “still a niche currency” internationally.
Harvard University economics professor and former IMF Chief Economist Kenneth Rogoff told Dajiyuan that for the Renminbi to become an international reserve currency, it needs to allow the Renminbi to be freely bought and sold.
“These are fairly basic changes that China (the Chinese Communist Party) needs to make. It must allow the Renminbi to float freely,” Rogoff said. “What it most needs to do is not intervene in the buying and selling of bonds, nor impose taxes, controls or restrictions on the amount of Renminbi people can buy and sell. If people cannot use a currency freely, it cannot become a reserve currency.”
University of South Carolina-Erskine Business School Professor Xie Tian analyzed for Dajiyuan, “Since the US replaced the pound as the global core currency after World War II, its position has been unassailable. Whether in international reserves, cross-border transactions, or financial circulation, the dollar has been far ahead.”
Xie pointed out that US economic growth provides crucial support for the dollar. Data shows that in the fourth quarter of 2025, US Gross Domestic Product (GDP) growth reached 5.3%, with an estimated annual economic growth rate of around 4.7%. Some market institutions predict that the US economy’s growth rate in 2026 may remain around 5% or even higher.
Additionally, China’s massive holdings of US dollar assets provide leverage for the US to sanction it. In recent years, China’s continued provocations in the Taiwan Strait, South China Sea, and East China Sea have raised alerts among Western nations.
In 2022, a legislative draft in the US Congress outlined severe sanctions that could be imposed on China due to the Taiwan issue, including sanctions on President Xi Jinping and other leaders, excluding Chinese banks from the global market, preventing Chinese companies from listing on US stock exchanges, banning imports of Chinese goods, and restricting Chinese energy projects.
According to a 2023 study by the Atlantic Council, if China invades Taiwan, the US and its allies could also take severe measures against China’s financial system, such as implementing blockades and restricting access to the SWIFT system for the People’s Bank of China, the Ministry of Finance, and China’s four major banks (these four banks collectively hold one-third of China’s banking industry total assets).
The impact of such measures on China and the global economy would be immense. The report stated that this would effectively freeze China’s foreign exchange reserves held in overseas custody accounts, preventing their use in defending the Renminbi exchange rate or meeting short-term financing obligations, such as importing goods or repaying foreign debt. Most of the assets of the four major banks overseas – about $586 billion – would be frozen.
Freezing China’s US dollar reserves would result in a shortage of dollars for China, leading to a depreciation of the Renminbi against the dollar. The report analyzed that Beijing could manage this devaluation pressure in the short term through strict capital controls and exchange rate interventions, but ultimately, it would need to allow the Renminbi to devalue to ease capital outflow pressure and stabilize China’s international balance of payments.
A depreciation of the Renminbi would lead to higher prices for imported goods and weaken China’s influence in the global economy. The interruption of China’s export trade would bring significant economic difficulties and financial pressure to Chinese companies and global market suppliers.
Russia serves as an example of a country facing Western sanctions. Following Russia’s invasion of Ukraine, Western countries imposed a series of financial sanctions. In 2022, the US and its allies imposed various financial sanctions on Russia, including freezing assets of the Russian central bank and removing major Russian financial institutions from the global SWIFT system. By making an example of Russia, they aim to deter other actions. China worries that in the event of a conflict in the Taiwan Strait, they could face similar treatment. In that case, the US Treasury bonds they hold could become targets of US sanctions.
In the 2022 sanctions, around $300 to $350 billion of Russia’s Central Bank foreign exchange reserves were frozen, with most being euro assets, but over $65 billion were dollar assets.
In comparison, China’s foreign exchange reserves far exceed Russia’s. Between January 2023 and August 2024, China’s mainland official foreign exchange reserves (excluding gold, IMF reserve assets, and China’s reserve positions in the IMF) ranged between $3.1 trillion to $3.29 trillion.
According to an analysis from 2023, approximately 50% of China’s total foreign exchange reserves are in dollars. A 2017 report from China’s foreign exchange management agency showed that around 60% of the mainland’s foreign exchange reserves are denominated in dollars. By the end of 2023, over 80% of Hong Kong’s foreign exchange reserves were in dollar assets, valued at around $420 billion. This indicates that China’s 2023 US dollar reserve asset value likely exceeds Russia’s 2019 US dollar reserve asset value by more than 15 times.