…
China’s Treasury holdings may not be shrinking at all, just changing address, and the clue is a $600 billion pile with Canada’s name on it.
…
According to the report, DoubleLine’s Vitaliy Liberman noticed that Canada’s stockpile of US debt securities had grown aggressively to nearly $600 billion of Treasuries and bonds, despite a tit-for-tat tariff war between the two countries. Liberman was told that the increase was in fact due to China, which has been moving US securities to custodian banks outside the United States.
…
China’s reported ownership of US Treasuries has fallen. Some investors and analysts believe that decline reflects China shifting its holdings to accounts in other countries, rather than actually reducing them, in order to give the appearance of decoupling from the United States. [The claims are unconfirmed.]
…
The question matters because China has historically been one of the biggest foreign buyers of US government debt. A genuine Chinese retreat would remove an important source of demand for Treasuries at a time of heavy US borrowing, while hidden holdings would suggest that demand is more stable than the headline numbers imply. The appearance of decoupling would also carry political weight amid trade tensions.
…
As an addition, official numbers by the U.S. Treasury show that largest foreign holders of U.S. treasury securities are Japan and UK, holding 1.1 and 1.0 trillion dollars, respectively. China is the third-largest holder (618 billion dollars) as of July 2026.
Canada is among the largest holders, too, counting for 426 billion dollars as per July this years. According to the linked report, this number has now increase to roughly 600 billion dollars, despite a ‘tariff war’ between Canada and the U.S.
…
I can’t tell if this is important or not. I don’t even have the vocabulary to articulate what I don’t understand. The summary here and the “If you’re new here” at the bottom of the article are not helping. No doubt there’s a key concept around buying debt at the scale of a country’s economy is eluding me.
Anyone care to explain?
It doesn’t matter to us. China has a piece of paper in Canada that the US owes them money. (Not a literal piece of paper)
I am not sure whether I understand this. I just wanted to provide additional context by adding these numbers. One underlying thing here is that China’s official rhetoric differs greatly from what they actually appear to do.
I’ll try to ELI5 here.
Suppose you need to borrow money, with a clear promise to pay back in the form of IOUs, and of course, there’ll be interest paid on top.
As someone lending you money, I am essentially making an investment. However, there are other people that want to know that I am not putting too much money into this investment, especially cause the money I have is pooled from these people, and because, for example, they may not like you, and so they don’t want their money to help you.
But I know that you’re most likely going to pay back with good interest on top, so it’ll be worth the money. So I’m just going to get some group of individuals, spread across different countries, one of them living in Canada, where I lend them the money, they promise to purchase your IOUs, and eventually, when you pay back, I get all the payments (and these individuals get a small slice).
Thus, on paper, I’ve sent my money to many countries, and that’s what these other people who I got money from are seeing. But in reality, they’re all buying your IOUs and I still effectively control them.
That explains the setup. Now to explain why this holding matters.
There’s a thing I can do about these IOUs, in that they can be sold to someone else who’s willing to buy them, whenever I need to. If I sell a lot of them away at a single time, I could sell them for cheap (without hurting my returns of course).
Now, you’re still trying to gather more money and thus selling more IOUs. But if I’m selling your existing ones, people are only gonna buy mine if your new IOUs don’t give the same amount of interest or more. If I sell your IOUs for slightly cheaper, they effectively give back more money, so the effective return is higher. So you have to match the promised interest that would outcompete that return, in order to be able to borrow more money. But it also means you have to pay back more later on.
If that made sense to you, then you’ve just understood the current situation of the records high US Treasury Yield, and why people are getting worried.
Now, why is my hiding of my actual holdings of your IOU a problem? Because it means you don’t know how much I’m going to try to sell at a single time, which I can leverage to drive the yield rate even higher.
Now, why is this potentially an issue for Canada? The current US administration is shown itself to be very happy to hop on any bandwagon where they can blame Canada for its problems to try and justify its actions against Canada, especially in, you guessed it, making Canada the “51st State”. I don’t doubt that the US gov can trace the ownership of these “IOUs” back to China, but we aren’t dealing with an administration that is sensible – their agenda is the point and everything else, even truth and logic, is secondary.