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Chinese financial researchers lodge concerns over U.S. debt as Beijing limits exposure
By Sylvia Ma
South China Morning News, Hong Kong
Saturday, August 16, 2025
Calls for China to gradually reduce its exposure to U.S. dollar assets are growing louder as Washington's national debt continues to set records, reigniting persistent worries over the long-term sustainability of an investment formerly considered rock solid.
"Although U.S. Treasuries have not yet reached the default threshold, their expansion is unsustainable," researchers from the Bank of China wrote in the latest issue of China Money, a publication supervised by the People's Bank of China, the country’s central bank.
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With this concern in mind, China has been trimming its U.S. Treasury holdings for three consecutive months, while keeping them roughly unchanged at the $756 billion level in June, according to data released on Friday by the U.S. Treasury Department. This remains the lowest level since March 2009.
The researchers noted that U.S. economic growth would be unlikely to offset rising debt from persistent budget and trade imbalances, warning that President Donald Trump's efforts to narrow the trade deficit could curb global demand for the U.S. dollar and undermine the currency's international role.
This, they said, would put the country in a "tug of war," oscillating between its economic and monetary priorities.
"Uncertainty over tariff, tax, and fiscal reforms, coupled with a potential U.S. dollar credibility crisis and speculation over the Mar-a-Lago Accord, could heighten volatility in the U.S. Treasury market," they said, and "gradually adjust U.S. Treasury holdings and appropriately increase reserves of gold, key resources, and strategic materials." ...
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