China Decode: Why China Keeps Selling U.S. Treasuries

What It Covers

China Decode examines three converging developments: the stalled $34 billion Power of Siberia 2 pipeline between Russia and China, China's ongoing sell-off of U.S. Treasury holdings as 30-year yields hit 5.2%, and China's commercial approval of the world's first brain-computer interface chip for spinal cord injury patients.

Key Questions Answered

• •Russia-China energy dependency: Russia's trade with China doubled from 2020 to 2024, with China absorbing 20% of Russia's crude oil exports. China now holds leverage over pipeline pricing, reportedly demanding rates 50% below Russia's asking price, because Europe's post-Ukraine war hydrocarbon cuts left Russia with few alternative large-scale buyers for its natural gas.
• •U.S. Treasury vulnerability: China holds roughly 50% of its $3 trillion in FX reserves in U.S. bonds, but has been diversifying into gold and commodities since 2022 FX sanctions on Russia signaled dollar-denominated assets carry geopolitical risk. Central banks globally now hold more gold than U.S. treasuries for the first time since the 1990s.
• •Shadow Treasury holdings distort data: Analysts including Brad Setzer argue China purchases significant U.S. Treasury bonds through custodial intermediaries in Belgium, Canada, and the Cayman Islands, meaning publicly reported Chinese sell-down figures likely understate actual holdings. Investors tracking China's true dollar exposure should monitor these third-party custodial flows, not just official PBOC reserve data.
• •CNY appreciation signals regime shift: China is allowing the renminbi to gradually appreciate against the dollar, reversing its historical strategy of building FX reserves to devalue the currency and boost export competitiveness. This shift is partly geopolitical — reducing trade surplus criticism from the U.S. and Europe — and partly structural, as FX reserve manipulation has stabilized.
• •China's neurotech commercial lead: Shanghai-based NeuroCall received the world's first commercial approval for a brain-computer interface in March, ahead of Neuralink, which remains in U.S. clinical trials with 21 participants after FDA rejection in 2022. China has backed the sector with a $1.7 billion industry fund and a 17-step government roadmap targeting global leadership by 2030.