Foreign Holdings of US Treasurys Reach All-Time High in March

The UK overtook China as the United States’ second-biggest foreign creditor.

The U.S. Treasury Department building at dusk in Washington on June 6, 2019. Patrick Semansky/AP Photo

Foreign holdings of U.S. Treasurys soared to an all-time high in March as demand for U.S. government debt continues to climb since President Donald Trump took office.

Data released on May 16 by the U.S. Department of the Treasury show that foreign holdings of U.S. Treasurys rose for a third straight month, to $9.05 trillion in March, up from $8.81 trillion in February. Compared with the same period last year, Treasurys owned by foreign countries and investors rose by nearly 12 percent.

Notably, China’s holdings fell below those of the UK for the first time since 2000.

The March data show China’s stockpile dropped to $765 billion, down from $784 billion in February. Meanwhile, British investors increased their holdings by nearly $30 billion, reaching $779 billion to overtake China as the United States’ second-biggest foreign creditor.

The shift highlights Beijing’s long-term strategy to diversify away from U.S. Treasurys. Once the largest foreign holder of Treasurys—peaking at more than $1.3 trillion in 2011—China has steadily trimmed that position, allocating toward other assets such as U.S. agency bonds and gold.

China’s vast Treasury holdings are a product of decades of trade surpluses with the United States, an imbalance that the Trump administration is now seeking to reduce. China was the top holder of Treasurys as recently as 2019, when Trump’s first-term trade war escalated tensions between the two countries. Since then, Beijing has accelerated efforts to diversify its foreign exchange reserves, although U.S. Treasurys remain a central pillar of its holdings.

Treasury data for March showed net sales of $27.6 billion in long-term U.S. debt by China, marking the fifth straight month of net reductions.

While the rapid liquidation of Beijing’s Treasury holdings has long been floated as a potential drastic measure in a financial war with Washington, Treasury Secretary Scott Bessent has dismissed such concerns.

In an interview with Yahoo Finance, Bessent said that liquidating Treasurys would ultimately backfire on Beijing, as it would strengthen the Chinese RMB and undermine China’s export-driven economy, which benefits from a weaker currency.

“If they started selling Treasurys, they'd have an effect on the price,” Bessent said. “But more importantly, they accumulate dollars, and what are they gonna do with the dollars?

“So if they sell Treasurys, then they would have to sell RMB, and it would strengthen their currency, and they’ve been doing just the opposite.

“They’ve had a weak RMB, or Yuan, policy. So, it really serves no purpose for them to weaponize Treasurys.”

Meanwhile, Japan remains the largest foreign holder of U.S. Treasurys, with holdings rising to $1.13 trillion in March. Japanese Finance Minister Kato Katsunobu recently suggested that Tokyo could use its Treasury holdings as leverage in trade negotiations with the United States, although he later clarified that Japan had no intention of threatening to sell off U.S. debt.