China has reduced its holdings of United States government debt to their lowest level in nearly two decades, even as Chinese investors are increasingly pouring money into U.S. stocks and other overseas assets.
New data shows that China’s holdings of U.S. Treasury securities fell to about $618 billion in July, the lowest level since 2008, highlighting a broader shift among foreign governments away from U.S. government debt.
The development comes amid growing concerns over America’s rising debt, aggressive use of tariffs and the increasing use of financial sanctions as a foreign-policy tool. The New York Times, in a report examining growing global caution toward the United States, pointed to the country’s roughly $40 trillion debt burden and President Donald Trump’s economic and legal policies as factors contributing to uncertainty among international investors.
Eswar Prasad, a former head of the International Monetary Fund’s China division, said geopolitical considerations and what he described as the “weaponization” of the dollar through financial sanctions were encouraging central banks and other official investors to diversify away from dollar-denominated assets.
However, China’s reduced appetite for U.S. Treasuries does not mean Chinese investors are abandoning American financial markets.
On the contrary, Chinese investors are increasingly seeking exposure to U.S. equities, particularly technology stocks, after Beijing expanded authorised channels for investing overseas.
Report says Chinese investors have rushed into U.S.-focused funds following an increase in the quota available under the Qualified Domestic Institutional Investor programme, known as QDII. China’s foreign exchange regulator recently increased the outstanding QDII quota by $6.8 billion to a record $183 billion.
The surge in demand was illustrated by a Nasdaq-100 fund whose daily individual investment limit was increased from 10 yuan to 5,000 yuan on September 9, only for its manager, Wanjia Asset Management, to slash the limit again to 100 yuan a day the following day.
Ivan Shi, head of research at fund consultancy Z-Ben Advisors, said the move reflected explosive inflows and continued strong demand for U.S. technology stocks among Chinese investors.
The appetite for overseas assets comes as confidence in China’s domestic economy remains fragile. China’s 10-year government bond yield is more than three percentage points below the comparable U.S. Treasury yield, while Chinese equities have broadly lagged the double-digit gains recorded by U.S. stocks this year.
China’s balance-of-payments data show that portfolio investment recorded a deficit of $426 billion in 2025, while net outflows reached $146 billion in the first quarter of 2026.
Several Chinese fund managers have responded to the surge by restricting subscriptions to overseas-focused products after briefly easing their limits. China Universal Asset Management and TruValue Asset Management are among those that have tightened access to funds investing in Nasdaq and global semiconductor stocks.
Xu Jie, a fund manager at Yuanzi Investment Management, said demand among Chinese investors for global asset allocation was continuing to increase, with diversification and participation in major international markets becoming increasingly important to long-term investors.
The United States remains the largest destination for QDII funds, accounting for nearly half of the approximately 1 trillion yuan ($150 billion) QDII business, according to Shanghai Securities.
Strong demand has also pushed some U.S.-focused exchange-traded funds listed in China to trade substantially above the value of their underlying assets. One Shenzhen-listed ETF tracking the Nasdaq-100 Technology Sector Index was trading at a premium of about 24 per cent on Wednesday.
Zhaopeng Xing, senior China strategist at ANZ, said the premium reflected strong household demand for global assets.
The contrasting movements highlight an important distinction in China’s international investment strategy: Beijing and Chinese households are not necessarily making the same investment decisions.
While Chinese official institutions have been reducing their exposure to U.S. Treasuries, private investors are seeking greater access to U.S. equities, particularly technology companies.
For Washington, the shift could have implications for the Treasury market if foreign official investors continue reducing their holdings and private investors assume a larger role in financing U.S. government debt. Private investors tend to be more sensitive to changes in prices, interest rates and market conditions than central banks and other long-term official holders.
Analysts have warned that a greater reliance on fast-moving private capital could make U.S. financial markets more vulnerable during periods of severe market stress, when investors can rapidly reduce their positions.
China’s latest moves therefore present a more complicated picture than a simple retreat from the United States. The country is reducing some official exposure to U.S. government debt while simultaneously allowing its investors greater access to American stocks.
The result is a notable shift in the composition of China’s exposure to the U.S. economy — away from government debt and toward private-market assets, particularly equities and technology stocks.
