In financial markets, timing is everything—for government policymakers as much as investors. So when word leaked this week that Chinese regulators were urging domestic financial institutions to limit their purchases of US Treasuries—and telling those with large exposures to reduce their positions—one question jumped out: why now? After all, the leak came at a time when this guidance had reportedly already been in place for weeks.
One major clue may be that the news broke on Bloomberg less than one week after Qiushi, a leading Chinese Communist Party journal for disseminating official views, published a 2024 speech by President Xi Jinping calling for the internationalization of China’s currency. Either development coming to light at this particular moment could be coincidental, but both surfacing within a single week are too conspicuous to ignore—especially amid what’s currently happening in Washington and New York.
Financial market turbulence
Markets have been unsettled by US President Donald Trump’s pursuit of Greenland, the unpredictability of US tariffs coupled with the Supreme Court’s impending ruling on their legality, and uncertainty over the administration’s dollar policy. Over the past month, the so-called debasement trade—selling or hedging dollar assets and buying precious metals—has gained momentum. Trump’s own comments seemingly endorsing a weaker dollar have added to the volatility.
Beijing has likely been watching closely how these developments fit into its long-term strategy. Over the past several years, China has been reported to be reducing its holdings of US Treasuries, falling from the largest sovereign holder to the third largest, behind Japan and the United Kingdom, although some of those sales may simply reflect assets transferred to other Chinese financial institutions and custodians in countries like Belgium. Other governments—including India and Brazil—have also been selling Treasuries.
At the same time, China is actively pursuing the internationalization of its own currency—a strategy aimed at reducing over time the US dollar’s central role as the primary global reserve currency. In a speech this summer, the Governor of the People’s Bank of China, Pan Gongsheng, explicitly stated that multipolarity was the government’s goal, with the dollar no longer playing such an outsized role in both the global economy and the use of financial sanctions. His deputy, Lu Lei, went a step further in December when he doubled down on China’s new cross-border payment systems, which are designed to operate outside Western networks.
A pointed message to Washington
Against this backdrop, how should one read the Chinese policy shift and its recent leak? Amid financial market turbulence, the Chinese government’s outreach to private financial institutions may have been primarily a reminder of the need to hedge at a moment of heightened uncertainty. It may also have been aimed at reinforcing policy guidance as Chinese exporters seek to invest the dollars they have amassed from the country’s massive export surge.
But it’s also possible the leak was intended as a message to Washington—or, more precisely, to Treasury Secretary Scott Bessent—in the wake of his recent comments about China. At a February 5 congressional hearing, Bessent spoke about “rumors of Chinese digital assets,” possibly backed by gold, that could be used to “build an alternative to American financial leadership.” Then, in a February 8 appearance on Fox News, he appeared to blame the current gold price volatility on China. “The gold move thing—things have gotten a little unruly in China,” he said.
Chinese investors have indeed been buying gold aggressively as they seek alternatives to the country’s decimated property market and rock-bottom interest rates. At the same time, the Chinese government has been a net purchaser of gold for the past fifteen months as it diversifies away from dollar-based assets. But China has hardly been alone in stocking up on bullion: JP Morgan estimates that global demand by central banks and investors for gold will average 585 tons per quarter this year.
Bessent’s decision to single out China may not have landed well in Beijing—especially coming so soon after meetings in Davos with his Chinese counterpart, He Lifeng, which reportedly went well. On February 9, Bessent announced “continued constructive engagement between both sides.” If this includes further talks with He Lifeng, they would likely take place ahead of the Trump-Xi summit in April.
But wherever the dust settles in the near term, the longer-term trajectory seems clearer. China’s ambitions to reduce reliance on the dollar will continue, and the Chinese government will keep finding ways to make life a little more difficult for the United States—and the dollar—wherever it can.
Jeremy Mark is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center. He previously worked for the International Monetary Fund and the Asian Wall Street Journal.
Josh Lipsky is chair of international economics at the Atlantic Council and the senior director of the Council’s GeoEconomics Center.
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