China has asked all of its banks to reduce exposure to American debt, citing rising market volatility and geopolitical risks. China has been steadily whittling away at its United States treasury holdings since peaking in 2013.

Bloomberg [behind a paywall] has reported, citing people familiar with the matter. The shift away from American debt has seen China overtaken by Japan and the United Kingdom as the largest foreign holders. Since peaking at around $1.3 trillion in 2013, its holdings have fallen roughly by half to about $650–700 billion, reaching levels not seen since 2008, according to a report by RT. 

Investors also bailed on the dollar back in October of 2025 when the U.S. national debt approached $38 trillion.

Investors Bail On The U.S. Dollar As Debt Approaches $38 Trillion

China’s guidance, reportedly intended to diversify market risk, came ahead of last week’s phone call between Chinese President Xi Jinping and his US counterpart, Donald Trump. In October, the two leaders agreed to a one-year trade truce, under which tariffs and export controls on each other’s goods would be lowered.

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Beijing’s latest move comes amid broader concerns about swings in US bond yields and heavy reliance on dollar-denominated assets. Germany’s financial watchdog, BaFin, has recently warned that the US dollar’s role as the world’s reserve currency could face challenges in 2026 amid geopolitical shocks and funding pressure.

The warning came after the Bloomberg Dollar Spot Index posted its sharpest drop since last April, after Trump announced sweeping global tariffs. Last month, Trump dismissed concerns over the currency’s weakness, saying it is “doing great” and should be allowed to “seek its own level.” -RT

US Treasury Secretary Scott Bessent said last week that the Treasury market had delivered its best performance since 2020 and saw record foreign demand at auctions.

Treasury prices extended losses and yields climbed modestly on Monday, while the dollar weakened against major currencies.