China began its long process of selling off its massive U.S. debt holdings in June 2019, when it was removed from its top spot as the largest foreign owner of U.S. Treasuries as Japan increased its own bond holdings. By April 2022, U.S. Treasuries held by the Chinese dropped below the $1 trillion mark.
From December 2022 to March, China sold over $31.3 billion in U.S. debt. By the end of July, China once again sold $46.2 billion in U.S. Treasuries. Current estimates of Chinese holdings of U.S. Treasuries put the number close to $859.4 billion. The last time it was this low was in May 2010. (Related: China is replacing its US Treasury holdings with GOLD.)
The reductions in Treasury holdings come at a time of heightened economic turmoil in the United States. Treasury yields have been declining for over a year, and Beijing is seeking ways to end the U.S. dollar's dominance in international transactions as the communist nation's relations with Washington continue to sour.
"The point of view is that after the [outbreak of the] Russia-Ukraine conflict, in order to reduce the risk of foreign exchange reserves being frozen, the People's Bank of China took the initiative to reduce the U.S. dollar allocation of foreign exchange reserves on a large scale," said Zhang Ming, a deputy director at the Chinese think tank the Chinese Academy of Social Sciences.
Japan, a major U.S. ally and the largest holder of U.S. Treasuries, is also selling off its holdings.
By the end of 2022, Japan's Treasury holdings dwindled below $1.1 trillion from $1.3 trillion at the end of 2021, the lowest level since early 2019. The country is expected to keep trimming its holdings until it goes below the $1 trillion mark – the first since 2011.
At least 19 other notable nations, including many major U.S. allies, have been selling off their debt.
Amid America's looming banking crisis and the uncertainty caused by the debt ceiling deadlock in May, the Cayman Islands, Bermuda and the Bahamas sold off U.S. Treasury bonds to varying degrees. These nations are known by many companies and wealthy Americans as the place where they open offshore accounts to store their funds with little to no tax.
The U.K., the third-largest holder of U.S. Treasury bonds, sold off $14.1 billion in May, making it the second consecutive month it reduced its U.S. debt holdings, with a total sell-off of $44.5 billion in April and May.
Australia, another major U.S. ally, sold $6.5 billion worth of U.S. Treasury bonds in May for the second consecutive month, representing a sell-off rate of 11 percent.
Major allies in the Middle East Iraq, Israel, Saudi Arabia and the United Arab Emirates also sold significant amounts of U.S. Treasuries. Israel sold $3.8 billion in April and May, reducing its holdings from the peak of $69 billion in December 2021 to around $43 billion today.
Saudi Arabia sold $4.9 billion in May, continuing a two-year-long trend of declining U.S. Treasury holdings for the kingdom from its peak of $184.4 billion two years ago. It now only has around $111 billion.
The U.A.E. sold off $1.2 billion in Treasuries in May. Iraq has sold $8.5 billion worth of U.S. Treasury bonds since February, representing a 21 percent sell-off rate with only $32.7 billion worth of U.S. debt held.
Other countries that sold off U.S. Treasuries are Belgium, Colombia, India, Ireland, Luxembourg, the Netherlands, Norway, the Philippines, Spain, Sweden, Thailand and Vietnam.
Watch this clip from Newsmax questioning why Secretary of the Treasury Janet Yellen is painting a rosy picture of the economy despite the flashing warning signs.