China's Holdings Of U.S. Debt Now Lowest In Decades

Chart of the Week #13

Right now, China's holdings of U.S. government debt are around $768 billion. That's the lowest they've been in decades.

That also means China has dumped about $266 billion worth of U.S. Treasuries in the last two years. That's a huge 26% decrease. The chart below illustrates the decline.

It's quite something when you think about it… Just a few years back, China was leading the pack in investing in U.S. debt. Things changed around 2018 though, when the trade war with the U.S. began. By 2019, China ceded the position to Japan as the biggest holder of U.S. debt.

But China really started backing off from U.S. debt in 2022, when the U.S. hit Russia with unprecedented sanctions, including removing many of its major banks from SWIFT. Between then and now, China’s ownership of U.S. government debt dropped off a cliff. The graph above illustrates this clearly.

But it’s not just China. Even U.S. allies like Belgium and Switzerland have been selling billions worth of Treasuries recently.

If this trend continues, it could spell trouble for the U.S. government. That’s because about one-third of its debt, or $8 trillion, is held by foreign countries.

Regards,

Lau Vegys