BEIJING: China has instructed domestic banks to reduce their exposure to US Treasury securities, according to reports by Reuters and Bloomberg, citing people familiar with the matter, a move that has drawn close attention in global financial markets.
The guidance, issued by Chinese financial regulators, advises commercial banks to limit new purchases of US government bonds and gradually cut existing holdings where exposure is considered high. The instruction applies to bank balance sheets and does not involve China’s official state reserves, the reports said.
China is one of the world’s largest foreign holders of US government debt, meaning shifts in its banks’ investment behaviour can influence global bond yields, currency markets, and investor sentiment.
Risk management approach
According to the reports, regulators framed the move as a risk-management measure amid increased volatility in the US bond market, rather than a change in China’s broader policy toward US assets. No specific reduction targets or timelines were disclosed.
Chinese authorities, including the central bank, have not issued a public statement confirming the guidance. The instruction was conveyed through regulatory channels, the reports said.
Market response
News of the directive weighed on US Treasuries, pushing prices lower and yields higher, as investors assessed the potential impact of reduced demand from Chinese financial institutions. Currency markets also reacted, with the yuan strengthening against the US dollar following the reports.
China has gradually reduced its exposure to US Treasuries in recent years as part of broader efforts to diversify foreign assets and manage financial risks, though it remains a major holder of US government debt.
Limited official comment
The reports were based on unnamed sources, and Chinese regulators have not publicly commented on the matter. As a result, the scale and pace of any reduction in bank holdings remain unclear.
For now, the reported guidance highlights Beijing’s focus on financial stability at a time of heightened sensitivity in global bond markets and shifting interest-rate expectations.
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