China Shifts U.S. Bond Custody Beyond Euroclear After 2022 Sanctions, Keeping Dollar Share Near 55%
Updated
Updated · Council on Foreign Relations · May 18
China Shifts U.S. Bond Custody Beyond Euroclear After 2022 Sanctions, Keeping Dollar Share Near 55%
2 articles · Updated · Council on Foreign Relations · May 18
China’s reported holdings in U.S. custodians fell after the G7 froze Russia’s reserves in 2022, but new estimates suggest that reflects a shift to non-U.S. custodians rather than a broad retreat from dollar assets.
A revised model spreads China’s hidden Treasury holdings across Belgium, the UK, France and Luxembourg instead of relying mainly on Euroclear, with Belgium now treated as about 20% of those European custodial centers.
Agency data point to a similar pattern: China’s disclosed holdings in U.S. custodians dropped to about $150 billion from more than $250 billion, while Canada and some European centers showed unusual increases.
Using those offshore custodial jumps, the analysis puts China’s true Agency holdings around $300 billion, with an upper-end estimate near $500 billion and total U.S. financial holdings still around 50% to 55% of reserves.
The broader implication is that TIC data now understate China’s U.S. bond exposure because Beijing appears to be using multiple overseas custodians to reduce sanctions risk and obscure its portfolio.
How is China's 'asset shell game' with U.S. debt reshaping the global financial order?
As sovereign wealth becomes untraceable, what new risks threaten the world's interconnected financial markets?
China Cuts U.S. Treasury Holdings by Half: The Real Story Behind Diversification, Gold Buying, and Financial Opacity
Overview
Since 2022, China has notably evolved its management of U.S. bond custody by strategically rebalancing its foreign exchange reserves. Instead of simply reducing its direct holdings of U.S. Treasury securities, China shifted a significant portion of its portfolio into U.S. Agency bonds. This deliberate adjustment means that while Treasury holdings appear to decline, China’s overall exposure to U.S. bonds and the dollar remains steady or even more diversified. As a result, official data that focus only on Treasury figures can be misleading, since China’s true U.S. bond footprint is maintained through this shift in asset composition.