China Treasury holdings may be masked through Canada and Belgium custodians

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China’s masked Treasury holdings

Highlights

China’s reported U.S. Treasury holdings fell to $591 billion in August 2023, down from $700 billion a year earlier and $1 trillion in April 2022.
Canada and Belgium’s Treasury holdings surged to $465 billion and $490.5 billion respectively in August, broadly aligning with the decline in China’s officially recorded holdings.
Analysts estimate China’s true U.S. financial holdings remain at 50%-55% of its reserve portfolio after accounting for assets held in Canadian and European custodians.

Custody data cloud China’s Treasury picture

As reported by Fortune, U.S. Treasury data show China’s reported holdings falling to $591 billion in August, the lowest in 18 years, from $700 billion a year earlier and about $1 trillion in April 2022.

The Treasury Department says the data is collected primarily from U.S.-based custodians and broker-dealers, meaning securities held in overseas custody accounts may not be attributed to their actual owners. That has fueled long-running skepticism among China watchers that Beijing is fully dumping U.S. assets, especially as other jurisdictions record unusually large increases.

Canada’s holdings rise to $465 billion in August from $169 billion in the same month five years earlier, while Belgium’s stockpile climbs to $490.5 billion from $228 billion over the same period. The shifts have drawn attention because they broadly align with the steep drop in China’s officially recorded portfolio.

Reserve strategy and market implications

China is seeking to challenge the U.S. dollar’s dominance in global finance, and U.S. sanctions on Russia after its 2022 invasion of Ukraine encourage the People’s Bank of China and other central banks to diversify reserves toward alternatives such as gold. President Donald Trump’s trade war, particularly its focus on China, also gives Beijing added incentive to reduce visible Treasury exposure and deepen financial decoupling from the U.S.

At the same time, China remains heavily reliant on export-led growth as domestic demand stays weak amid its property slump and debt overhang. The country posts a record $1.2 trillion trade surplus in 2025, and its surplus reaches $938 billion in the first nine months of 2026, raising expectations that it could exceed last year’s level.

Those large external surpluses still need to be recycled into financial assets, which may explain why China could be shifting Treasury holdings to custodians outside the U.S. Brad Setser, a senior fellow at the Council on Foreign Relations and a former Treasury official, says the evidence is particularly strong for Chinese agency debt being held through Canada, and he estimates China’s total U.S. financial holdings still amount to between 50% and 55% of its reserve portfolio after adjusting for assets held in Canada and European custody centers.

In our earlier article on surging long-term U.S. Treasury yields and the mounting strain from large federal deficits, we explained how borrowing costs above 5% are rippling through mortgage rates, federal interest expenses, and overall financing conditions. We also noted that persistent heavy issuance, geopolitical risks, and political gridlock around deficit reduction can keep yields elevated—an important backdrop for assessing shifts in major foreign holders’ Treasury exposure.

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