On June 18th local time, latest data released by the US Treasury Department shows that China continued to reduce its holdings of US government bonds in April, with its holding scale dropping to its lowest level in nearly 18 years.
On June 19th, the Hong Kong-based South China Morning Post reported that as global geopolitical risks intensify and concerns about the independence of the Federal Reserve increase, China is continuously promoting diversification of its foreign exchange reserves. At the same time, China is increasing its gold reserves to cope with geopolitical and financial risks.
The latest international capital flow report released by the U.S. Treasury shows that the amount of U.S. government bonds held by Chinese investors has decreased from $652.3 billion in March to $651.1 billion in April. According to statistics from financial data service provider Wind, this is the lowest level since September 2008.
China's trend of reducing its holdings of US debt has persisted for many years. Since Trump's first presidential term, China's overall size of US debt holdings has been slowly but non-linearly decreasing. In March last year, China was surpassed by the UK, becoming the third-largest holder of US government debt overseas, following Japan and the UK.
Overall, the total foreign holdings of U.S. debt in April reached 9.353 trillion US dollars, which is higher than the level in March but lower than the historical record of 9.49 trillion US dollars set in February.
Among them, Japan, the largest holder of US debt, has increased its holdings from $1.19 trillion in March to $1.21 trillion. The second-largest holder, the United Kingdom, has seen its holdings rise from $926.9 billion to $937.5 billion.
In contrast, Canada reduced its holdings by more than $42 billion in April, reducing its holdings to $397.1 billion; Ireland, which ranked ninth, also reduced its holdings from $355.2 billion to $345.3 billion.
U.S. Treasury Department
According to The South China Morning Post, countries including China reducing their holdings of U.S. debt reflect concerns about global economic stagnation amidst rising political and economic uncertainties. In April, the conflicts between the United States and Israel with Iran entered a fragile phase, with ceasefire agreements being broken and negotiations falling into stalemate, casting a shadow over the prospects for long-term solutions.
Meanwhile, the issue of the Fed's independence has also drawn market attention. That month, Kevin Wachsel was nominated to be the chairman of the Federal Reserve. During the hearing on April 21, he stated that he would 'never' become a ' puppet' of the U.S. President. However, investors remain concerned that political factors may affect the Fed's future interest rate decisions.
On the 17th of this month, Wosch presided over the first monetary policy meeting since taking office. As generally expected by the market, the Federal Reserve kept interest rates unchanged. However, analysts believe that the policy statement conveyed an anti-inflation stance that was more hawkish than market expectations.
The newspaper also noted that while China has been reducing its holdings of U.S. debt, it has been increasing its gold reserves in recent years. Data on China’s official reserve assets released by the People’s Bank of China on the 7th showed that as of the end of May, China’s gold reserves had increased for the 19th consecutive month, reaching a total of 74.96 million ounces, an increase of 320,000 ounces compared to 74.64 million ounces at the end of April.
Gold is considered an important hedge asset for dealing with geopolitical and financial risks. Data from the World Gold Council shows that despite the high price of gold, the amount of gold purchased by central banks in various countries will remain high in 2025. Last year, global central banks purchased a total of 863 tons of gold. Poland was the largest purchaser, with a purchase amount of about 100 tons. Emerging economies such as Kazakhstan, Brazil, and Turkey followed closely behind.
According to a report released by the European Central Bank in early June, as of the end of 2025, the proportion of US government bonds in the total amount of global official reserves has been declining for two consecutive years, dropping by 4 percentage points compared to the end of 2023. Meanwhile, the proportion of gold reserves increased by 11 percentage points during the same period.
At the end of last year, gold accounted for 27% of the total amount of official reserves worldwide, surpassing U.S. government bonds as the largest asset in global official reserves.
Analysts believe that under the dual influence of the Federal Reserve’s continued expectation of interest rate cuts in 2026, which will further reduce real interest rates, and the ongoing global geopolitical risks, the trend of central banks purchasing gold will not reverse in the short term. As gold plays a increasingly important role as a reserve asset globally, the international monetary system is also accelerating its transition away from the “unipolar era” dominated by US dollar assets, towards a “plural reserve system” supported by both gold and multiple currencies.
