By Angelo Giuliano
China didn't wake up one morning and decide to "decouple." Beijing started cutting exposure to US Treasuries more than a decade ago, quietly, without a press conference and without asking permission from Wall Street. Official holdings have been slashed by more than HALF from the $1.3 trillion peak in 2011. They now stand at $633.4 billion— the lowest level since 2008, during the Great Financial Crisis. China's share of total US Treasuries outstanding is just 2 percent, the lowest since 2001. That is a 12 percentage point collapse from the peak. Since the start of 2024 alone, China has trimmed another $183 billion, according to the latest TIC data. That is not a trader taking profits. That is derisking.
Where did the surplus go? Not into more American paper. Into gold. Into the Belt and Road. Into ports, railways, power plants, mines, telecoms, industrial parks—tangible assets that cannot be frozen with a statement from the US Treasury. China is recycling its trade surplus into metal and concrete, not into an IOU that Washington can cancel when politics change. Gold does not need correspondent banks. A port in the Indian Ocean does not sit inside the New York clearing system. A railway across Central Asia cannot be switched off by OFAC. That is the real rotation: from financing America's deficits to building physical capacity across Eurasia, Africa, and the Global South.
The United States started the other half of this process when it turned the dollar into a weapon. Freeze reserves. Cut countries off SWIFT. Secondary sanctions. Extra-territorial jurisdiction. Threaten banks in third countries for clearing a legal trade. Once you demonstrate that dollar assets can be confiscated for political reasons, every finance ministry on earth updates its risk model. Russia learned it the hard way in 2022, when hundreds of billions were immobilised overnight. Everyone else took notes. If it can be done to Moscow, it can be done to anyone who falls out of favour.
America did this to itself. The dollar was its mightiest weapon—not the aircraft carriers, not the bases, the dollar. Dollar hegemony is what allows Washington to spend a trillion dollars a year it does not actually earn, to run chronic deficits, to fund a global military footprint on credit, and to buy real goods with paper claims. That is the privilege. Weaponise the currency and you teach the world that holding your paper is a political risk. You do not strengthen the weapon. You destroy its usefulness. A reserve currency that can be switched off is no longer a reserve currency. It becomes a hostage note.
This is the same structural trap that produced the Opium Wars. Britain bought tea, silk and porcelain from China and paid in silver. China did not need British manufactures in the same volume. Silver drained from west to east. London's solution was to force onto China a product China did not want. The result was war, unequal treaties, and a century of humiliation. Today the product is paper dollars and ever-rising Treasury debt that is never meant to be repaid. The surplus country is again refusing to absorb the deficit country's paper. The difference is that China this time has options: gold, bilateral currency lines, commodity settlement, and a Belt and Road network that turns surplus into roads, ports, and energy instead of someone else's fiscal gap.
De Gaulle called it the "exorbitant privilege"—the ability to print claims on the rest of the world's labour and resources. That privilege only works if the rest of the world keeps accepting the paper and warehousing the debt. When the largest surplus country stops doing that, the free lunch shrinks. The US-China 10-year yield gap has blown out to around 312 basis points, near the widest on record. That spread is not a curiosity for bond desks. It is the market pricing two different monetary regimes: one still living off reserve-currency inertia, the other accumulating metal and hard assets. Gold keeps making new highs for a reason. Official buyers are not chasing a headline. They are reducing the share of their reserves that can be sanctioned.
De-dollarization is not a slogan and it is not an overnight collapse. The dollar still has enormous inertia. Oil contracts, trade invoicing, deep Treasury markets, and decades of accounting habit do not vanish in a year. BRICS is not a magic replacement switch. What is changing is the direction of travel. More local-currency settlement. More yuan lines. More gold in official vaults. Less willingness among surplus nations to keep absorbing Washington's deficits as a civic duty. China's exit from Treasuries is another structural headwind for demand at the exact moment issuance remains heavy. The trend is set to continue.
China planned for this years before the sanctions era made the logic obvious to everyone else. Diversify reserves. Build payment workarounds. Buy gold. Put surplus into Belt and Road projects that create long-term commercial and political ties. The United States accelerated the same process by showing the world what the dollar can be used for besides payment. One side reduced risk and converted paper into gold and tangible assets. The other side raised the cost of holding the risk—and in doing so blunted the very instrument that financed its power. That is how the process actually started. Not with a speech. With a balance sheet.
The views do not necessarily reflect those of DotDotNews.
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