China suddenly sold more than 3,000 billion USD of US bonds
China suddenly sold more than 3,000 billion USD in US bonds, coinciding with the US government shutdown, a move that immediately caused turmoil in the international market.
While the US government is paralyzed by budget disagreements, China has quietly made a shocking move: reducing its holdings of hundreds of billions of dollars in US treasury bonds.
Unlike previous US government shutdowns, this one is more serious. The reason is not only because of disagreements in Congress, but also because Washington is really short of money. With public debt reaching record levels, interest rates rising and bond buyers dwindling, China's "exit" from the market has added to the tension.
Beijing’s reduction of more than $3 trillion in US bonds is not simply a change in its investment portfolio, but a long-term strategy. For many years, China has been quietly reducing its holdings of US assets to protect its financial security in the context of Washington’s increasing dependence on debt and political instability.
Financial experts say the move is both a hedge against risk and a gentle warning to the US. When major buyers like China pull out, US borrowing costs rise and market confidence in the US dollar is challenged.
Once the world’s insurance, US bonds are now a systemic risk. Swelling government spending, unstable revenues, and a shrinking Federal Reserve holdings have all put US capital markets under severe pressure.
Analysts say China does not need to make loud announcements or exert direct pressure. Just by technical selling moves, Beijing has made Washington feel the weight.
After the US government shutdown, the reaction from Washington showed clear concern. President Trump once asserted that the shutdown was a good thing to cut spending, but just a few days later softened his tone, calling for dialogue with China. US financial officials also quickly signaled that they wanted to "restore exchanges" with Beijing.
In response to the US call, Beijing has remained calm. Observers say China is not in a hurry to react, but is waiting for the US to show real goodwill.
The latest budget crisis has exposed weaknesses in the US political structure: chronic bipartisan conflict, dysfunctional fiscal policy, and declining confidence in the dollar. With Washington unable to pass a spending bill on time, hundreds of thousands of public employees have been furloughed and the economy is at risk of stagnation.
More importantly, America’s reputation as the “world’s most reliable issuer of debt” is in jeopardy. As major creditors like China begin to withdraw capital, other investors are also wary, tightening America’s ability to borrow.
