The US debt 'IOU' is triggering a crisis of trust globally, while the shining moment for gold has just begun.
The latest data from the US Treasury shows that China reduced its holdings of US Treasury bonds by $11.8 billion in October, bringing its total to $688.7 billion, the lowest level since 2007.
Not only China, but Canada also dumped $56.7 billion of US debt during the same period, while Japan and the UK increased their holdings by $10.7 billion and $13.2 billion respectively.
This divergence highlights the quiet differentiation of global financial camps, and a silent financial revolution has already begun.
01 Reduction of US debt: The wisdom of not putting all your eggs in one basket
China's reduction of U.S. Treasury holdings is not an impulsive decision, but a prolonged strategic retreat. Looking back to 2011, China held as much as $1.3 trillion in U.S. Treasuries, which has now been cut almost in half.
Behind this transformation is a sober recognition of risk. The total U.S. federal debt has surpassed $38 trillion, with a debt-to-GDP ratio as high as 123%, and annual interest expenditures exceeding defense spending.
China's reduction of U.S. Treasury holdings is a typical example of the wisdom of 'not putting all your eggs in one basket'. When U.S. debt is so large and political polarization is severe (such as the 43-day U.S. government shutdown in 2025), any rational investor would adjust their asset allocation.
China is reducing its U.S. Treasury holdings while consecutively increasing its gold holdings for 12 months, with current gold reserves exceeding 74 million ounces. This path of 'exchanging paper assets for hard currency' is clearly visible.
02 Who's Taking Over? The Dangerous Game of the U.S. Treasury Market
The U.S. Treasury market has never been as fragmented as it is today. While countries like China and Russia continue to sell off, U.S. allies such as Japan and the UK are increasing their holdings against the trend.
Japan currently holds U.S. Treasuries amounting to $1.2 trillion, the highest level since July 2022, firmly maintaining its position as the largest creditor of the United States.
This pattern of 'reducing in the east and increasing in the west' reflects the different considerations of global economies. Japan's own national debt ratio has already surpassed 260%, leaving little capacity to alleviate concerns for others.
The U.S. Treasury is also trying various ways to maintain stability in the U.S. Treasury market, including plans to adjust banks' supplementary leverage ratios and encouraging banks to increase their holdings of U.S. Treasuries.
Even the cryptocurrency market may be utilized as an important buyer of U.S. Treasuries.
03 Weaponization of the Dollar: A Silent Financial Revolution
What truly triggered the wave of U.S. Treasury reductions is the trend of dollar weaponization. When Russia's foreign exchange reserves were frozen and Afghanistan's overseas assets were seized, countries realized the risks of over-reliance on dollar assets.
China's reduction of U.S. Treasury holdings is not a short-term operation, but a strategic response to 'dollar weaponization'. When financial instruments come with political conditions, reducing holdings is the most straightforward expression.
This shift is reflected not only in the reduction of U.S. Treasury holdings, but also in the internationalization process of the renminbi. Currently, the renminbi's share in global payments has risen to 4.6%, with a share exceeding 30% in cross-border trade settlements.
The rise of gold is also a reflection of this trend. Global central banks net purchased 229 tons of gold in the third quarter of 2025, reaching a historical high, indicating that gold is becoming a new anchor point in the global monetary system.
04 The Impact on the U.S.: Countdown to the Debt Bomb
The U.S. is facing not only a debt problem but also a credit crisis. The U.S. government's 'borrowing to pay off old debts' model is becoming unsustainable, with annual interest expenditures reaching about $1 trillion.
More seriously, the internal consensus in the United States is collapsing. Political polarization has led to a loss of policy coherence, with frequent scenes of street protests and confrontations with federal forces, further amplifying the spillover effects of debt risks.
China's reduction of U.S. Treasury holdings will push up U.S. Treasury yields, which means the U.S. Treasury will need to pay more interest, increasing inflation risks. U.S. Treasuries that are not auctioned off will be absorbed by the Federal Reserve, equating to printing money and injecting it into the market, further exacerbating inflation.
U.S. Treasury Secretary Yellen has firmly refuted the notion of 'selling America', but the data itself cannot be ignored: the monthly fluctuations in the U.S. Treasury market frequently exceed $50 billion, becoming the norm.
05 The Impact and Opportunities for Ordinary People
The drama of U.S. Treasuries not only concerns the national level, but also directly affects the wallets of ordinary people. Exchange rate fluctuations make the costs of studying abroad and purchasing from overseas fluctuate; asset price re-evaluations affect investment returns; even the job market is indirectly impacted.
For investors, three response strategies can be considered:
First, diversify asset allocation to avoid over-reliance on a single currency or asset;
Second, focus on safe-haven assets such as gold, aligning with national strategies;
Third, maintain sufficient cash flow to cope with market fluctuations.
From national strategies, we can draw personal finance wisdom: shift from reliance on fiat currency to anchoring on real assets, from passively enduring fluctuations to actively managing risks.
In the coming years, we will witness a reshuffling of the global financial order. The dollar-dominated unipolar system is gradually giving way to a multipolar currency structure, with the roles of gold and non-dollar currencies becoming increasingly important.
The impact of this transformation will quietly permeate the lives of ordinary people, from supermarket product prices to overseas study costs, from investment returns to changes in the job market.
The financial landscape is being restructured, and rational investors should focus on trends rather than short-term fluctuations, seizing structural opportunities instead of chasing market hotspots.
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