China's Treasury Pile Fell to $591 Billion — Or Did It?

By Grace Kim

China's official U.S. Treasury holdings fell to $591 billion in August, the lowest level in 18 years. Yet a growing body of evidence suggests Beijing hasn't actually walked away from American debt — it's just stopped reporting it under its own name.

Fresh Treasury Department data released Friday show China's stake down from $700 billion a year earlier and from $1 trillion as recently as April 2022. On paper, that's a steep, years-long sell-off that began around 2021 and has fueled fears of de-dollarization.

The catch sits in how the data gets collected.

Why doesn't the official number capture China's real holdings?

The Treasury Department itself cautions that the figures come primarily from U.S.-based custodians and broker-dealers. Securities held in overseas custody accounts, the department notes, may not be attributed to their actual owners.

That gap shows up in the numbers elsewhere. Canada's reported Treasury holdings soared to $465 billion in August, up from $169 billion five years earlier. Belgium's stockpile jumped to $490.5 billion from $228 billion over the same span. Include bonds backed by federal housing agencies, and the totals get even bigger.

The takeaway: someone is parking a lot of dollar debt outside the U.S. financial system, and the timing tracks China's sell-off almost exactly.

What's driving the shift?

Several forces pushed Beijing to restructure. U.S. sanctions on Russia after its 2022 invasion of Ukraine pushed the People's Bank of China and other central banks toward alternative reserves like gold. President Donald Trump's China-focused trade war gave Beijing further reason to decouple from U.S. assets.

But China can't fully quit dollars, because it keeps earning them. The country posted a $1.2 trillion trade surplus in 2025 — the largest in recorded history — while growing three times faster than global goods trade. In the first nine months of 2026, the surplus reached $938 billion and could break last year's record.

Those surpluses have to be recycled somewhere. Analysts say that flow likely runs through non-U.S. custodian banks, keeping Chinese-owned Treasuries off the "China" line in official American data.

How big could the hidden stash be?

Brad Setser, a senior fellow at the Council on Foreign Relations and a former Treasury official, put a number on it in a May analysis. Since about 2020, Treasuries held in custodians in the United Kingdom, France, Luxembourg, and Belgium have surged.

Add China's declared holdings to the amounts sitting in Canada and the European custodial centers, and the total climbs as high as $500 billion. A narrower adjustment — counting only Canada, Luxembourg, and France since about 2022 — still puts China's true holdings around $300 billion.

"The evidence that China uses a Canadian custodian for some of its Agencies is especially strong — note the sudden jump in Canada's holdings and the big impact of the detailed June survey at some early points," Setser posted on X on Wednesday, highlighting a Bloomberg story on the subject.

He noted one other shift: China has trimmed long-term Treasuries while adding short-term bills. Even so, he estimated China's total U.S. financial holdings still run between 50% and 55% of its reserve portfolio.

"Both the Treasury and the Agency portfolios need to be adjusted for the bonds that China keeps on custody in Canada and in Europe," Setser said. "That adds to uncertainty around the estimate, as it seems likely that China is now using multiple non-U.S. custodians to mask its true holdings."

In plain terms: the headline sell-off is real, but so is the backdoor buying — and until custodial data improves, any de-dollarization narrative built on the official figures deserves a discount.