China dumps US treasuries
South Korea buys in
China, engaged in a power struggle and trade war with the United States, has continued to sell U.S. Treasury bonds this year, according to data. As of October, China’s holdings of U.S. Treasuries (government, corporate, and individual combined) stood at $688.7 billion, down $11.8 billion from the previous month. This year alone, it has reduced its holdings by $70.3 billion.
At one point, China was the largest holder of U.S. Treasuries, with over $1.3 trillion invested in November 2013. Compared to that period, its holdings have been halved. During the global financial crisis, as major financial institutions collapsed, particularly in the U.S., China aggressively purchased U.S. Treasuries to become the top holder. However, around 2017, when U.S. President Donald Trump first took office, China began selling its U.S. Treasury holdings and has continued to do so aggressively.
China’s ranking among U.S. Treasury holders has dropped from an “overwhelming first place” to a “stable third place.” It ceded the top spot to Japan in 2019 and was overtaken by the U.K., which has been actively purchasing U.S. Treasuries, falling to third place in March. The gap between China and the U.K. has since widened, with the U.K. holding $189.2 billion more in U.S. Treasuries as of October. While China reduced its holdings by $70.3 billion this year, the U.K. increased theirs by $155.1 billion. As of the end of October, the U.K.’s holdings stood at $877.9 billion, while Japan, the top holder, held $1.2 trillion. Japan, the largest holder, also increased its U.S. Treasury holdings by $138.5 billion this year.
Meanwhile, South Korea saw an increase in its U.S. Treasury holdings and rose in rankings. This reflects the growing popularity of U.S. Treasuries among individual investors in South Korea, driven by aggressive marketing by securities firms and relatively high U.S. interest rates. South Korea’s holdings reached $145.1 billion as of October, up $2.2 billion from the previous month. This year, the total increase amounted to $20.2 billion. The U.S. government publishes data only up to the 20th rank, where South Korea was placed 17th—up one spot from 18th last year, overtaking Saudi Arabia. In terms of year-to-date growth in U.S. Treasury investments, South Korea ranked 9th. According to the Bank of Korea, South Korean individuals’ overseas bond investment balance reached $39.1316 billion as of the end of the third quarter, up $2.5 billion from the previous quarter and $16.1228 billion from the same period last year.
For the U.S., grappling with soaring fiscal deficits and national debt exceeding $38 trillion, China’s “dumping” of Treasuries is a growing concern. The country now spends over 1 trillion Korean won annually on interest payments alone, with recent interest expenses surpassing defense spending. Even as the Federal Reserve maintains a rate-cutting stance, U.S. Treasury yields have remained high, partly due to China’s sustained sales. U.S. Treasury Secretary Scott Bessent has stated that stablecoins could become a key demand base for U.S. Treasuries, reflecting the government’s efforts to find new buyers. In July, the U.S. enacted a law regulating stablecoins, allowing short-term U.S. Treasuries to be used as reserve assets to maintain their peg to the dollar. Stablecoins, designed to be pegged to fiat currencies like the U.S. dollar (e.g., 1 coin = $1), have seen rapid growth in recent years.