Chinese regulators told banks on Monday to curb purchases of U.S. Treasuries, and the yuan strengthened to about 6.91 per dollar, its best level since May 2023 in Hong Kong trading. The move aims to reduce concentration risk and came ahead of talks between Donald Trump and Xi Jinping.
Both onshore and offshore yuan traded near 6.91 on Tuesday morning, with the currency up about 5% since early 2025. The yuan is on track for a seventh straight monthly gain, the longest run since 2020–2021.
Mark Cranfield, Markets Live strategist, said the guidance helps shift investor flows toward alternative currencies. “The warning from Chinese authorities to their banks about holding Treasuries is the type of messaging which is likely to be quietly doing the rounds in Europe and Asia.
Chris Weston, head of research at Pepperstone Group, linked yuan strength to broader dollar selling. “Ongoing strength in the Chinese yuan appears to be a central factor driving broader dollar selling flows, with the PBOC shifting away from a stable exchange rate to one more tolerant of a stronger yuan.
Economists and lawmakers warned about fallout if foreign Treasury buying falls sharply. “That will send consumer prices soaring.” noted Peter Schiff and Elizabeth Warren warned higher borrowing costs could hit mortgages and car loans.
China held about $682.6 billion of U.S. government debt as of November 2025 (Ed. note: China ranks third after Japan and the UK). Danish fund AkademikerPension planned to reduce Treasury holdings, and Anders Schelde said, “The US is basically not a good credit and long-term the US government finances are not sustainable.” The Federal Reserve has also reduced its Treasury holdings by roughly $1.5 trillion since May 2022.
