Asger Risom
Official U.S. Treasury data shows China slashing its American debt holdings to an 18-year low of $591 billion, but researchers argue Beijing is simply shifting the funds to overseas custodian banks. Massive, unexplained surges in U.S. debt held in Canada and Belgium suggest China still maintains hundreds of billions of dollars in Treasury securities to absorb its record-breaking global trade surpluses.
Official U.S. Treasury data released Friday shows China’s holdings of American debt plummeting to an 18-year low of $591 billion. But Beijing is not actually dumping its U.S. assets as rapidly as those numbers suggest. Instead, the Chinese government is routing hundreds of billions of dollars in Treasury securities through non-U.S. custodian banks to obscure its true financial position.
According to a new report from Fortune, economic researchers have tracked massive, unexplained spikes in U.S. debt held in allied nations. These sudden surges in European and Canadian accounts perfectly align with China’s reported sell-offs. This indicates China is actively moving its dollar reserves off Washington’s main reporting radar.
The discrepancy exposes a structural blind spot in how the U.S. Treasury Department tracks foreign debt. Because the official figures rely primarily on U.S.-based broker-dealers, the government often loses visibility on the actual owners of securities held in overseas accounts. This loophole allows foreign powers to maintain massive dollar reserves without showing up on official U.S. balance sheets.
The Custodian Loophole
China’s official U.S. debt portfolio has supposedly evaporated from over $1 trillion in early 2022. During that exact same window, Canada’s U.S. Treasury holdings surged from $169 billion to $465 billion. Belgium experienced a nearly identical explosion, with its stockpile more than doubling to $490.5 billion.
Former Treasury official Brad Setser estimates these offshore maneuvers push China’s actual U.S. debt holdings up to $500 billion higher than officially reported. Setser points out that incorporating proxy accounts across Canada, the U.K., France, Luxembourg, and Belgium completely changes the geopolitical math. The Council on Foreign Relations senior fellow notes that Beijing is likely using multiple custodians to intentionally mask its footprint.
These strategic financial shifts coincide directly with worsening relations between Washington and Beijing. Former President Donald Trump’s trade war initially gave China strong reasons to decouple its economy from direct U.S. oversight. Sweeping financial sanctions against Russia following its 2022 invasion of Ukraine further motivated the People’s Bank of China to obscure its dollar assets.
A Trillion-Dollar Cash Problem
Geopolitical friction and tariff threats have undoubtedly pushed China to diversify its reserves into alternative assets like gold. However, the world’s second-largest economy still faces an enormous mathematical reality regarding its incoming cash. The country simply brings in far more foreign currency than it can easily stash in non-dollar markets.
China posted a record-breaking $1.2 trillion trade surplus in 2025 across global markets. The manufacturing powerhouse is currently on pace to shatter that record this year, logging $938 billion in the first nine months alone. That massive, unprecedented influx of foreign cash must be recycled somewhere safe.
Despite the loud political push for de-dollarization, the U.S. Treasury market remains unparalleled in global finance. No other financial ecosystem on the planet is large and liquid enough to absorb that kind of capital without breaking. This forces Beijing to keep buying American debt even as it tries to hide the receipts.
Hiding in Plain Sight
The current global narrative heavily emphasizes the idea that BRICS nations are completely abandoning the U.S. dollar. The reality buried in the Treasury data shows a much more complicated relationship between the rival superpowers. China still relies heavily on the stability and scale of the American financial system to maintain its export-driven economy.
Setser ultimately calculates that U.S. financial assets still account for roughly half of China’s entire reserve portfolio. The reduction in visible, long-term Treasury bonds masks a quiet shift toward short-term bills held in foreign accounts. Beijing is simply rearranging its financial furniture rather than actually moving out of the house.
This covert accumulation proves that dollar dominance remains a stubborn reality for global trade. Washington may struggle to accurately track every single proxy account scattered across Europe and Canada. However, the sheer volume of China’s trade surpluses guarantees that the U.S. Treasury will remain its primary piggy bank.
