China has fallen to the third-largest holder of US Treasuries, with the UK now in second place, according to data from the US Treasury Department for March. This is the first time in over two decades the UK has overtaken China.

Total foreign holdings of US Treasuries reached a record US$9.05 trillion in March, up US$233.1 billion from the previous month.

Japan remains the largest overseas holder with US$1.13 trillion, while the UK’s holdings rose toUS $779.3 billion, surpassing China’s US$765.4 billion.

China’s decline included net sales of US$27.6 billion in long-term Treasuries during March.

Other countries increased their holdings, including Canada, which rose by US$20.1 billion to US$426.2 billion, and Belgium, which grew by US$7.4 billion to US$402.1 billion.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s Treasury holdings reflect a decade-long strategic shift

China’s decline from being the top holder of US Treasuries to third place represents a significant long-term trend rather than just a recent development.

From holding over $1.3 trillion in US debt in 2013, China has reduced its position by nearly 40% to $765.4 billion today 1.

This gradual reduction aligns with China’s publicly stated goals of diversifying its massive foreign exchange reserves away from dollar-denominated assets, including increasing its gold reserves by 16% since 2021 1.

Financial analysts note this shift isn’t simply about geopolitical tensions but reflects China’s strategic repositioning of its investment portfolio toward shorter-maturity instruments and alternative reserve assets 2.

The trend began well before recent trade tensions, with China’s holdings peaking over a decade ago and steadily declining through multiple US administrations, indicating a consistent long-term strategy rather than a reaction to current politics.

2️⃣ Foreign Treasury demand remains at record levels despite tensions

Despite widespread concerns about trade wars affecting Treasury markets, total foreign holdings reached an all-time high of $9.05 trillion in March 2025, increasing by $233.1 billion in a single month 3.

This contradicts predictions of foreign investors abandoning US debt, with the data showing several key US partners actually increasing their positions – Japan added to its $1.13 trillion holdings for the third straight month, while Canada boosted its position by $20.1 billion 3.