Archive · 4 Sep 2026
Chinese Banks Buy US Treasuries as Yuan Strengthens
Chinese banks are offering people more interest for keeping their money in US dollars.
The banks can then use those dollars to buy US government bonds.
These bonds currently offer better returns than many investments in China.
Keeping more money in dollars may also slow the yuan from becoming even stronger.
A stronger yuan can make Chinese goods more expensive for customers in other countries.
China has a large supply of dollars because it sells many goods overseas.
However, China’s officially reported Treasury holdings have been falling for years.
The recent bank purchases do not necessarily mean China has reversed its broader approach to US government debt.
Chinese banks have reportedly raised dollar deposit rates and used the funds to buy US Treasuries.
The strategy offers banks higher returns as Chinese domestic bond yields remain low.
Higher dollar deposit rates may discourage savers from converting dollars into yuan, easing upward pressure on the currency.
Dollar deposits in China reached $1.18 trillion at the end of July, up 17.9% from a year earlier.
China’s reported US Treasury holdings fell to $633.4 billion in June, although overseas custodians may obscure the full total.
- Who
- Chinese commercial banks, Chinese savers, and policymakers in Beijing are involved.
- What
- Chinese banks have reportedly raised dollar deposit rates and invested the resulting funds in US Treasuries.
- When
- The purchases have occurred in recent months; dollar-rate increases began in June, with some smaller banks raising rates further since August.
- Where
- The activity involves banks and dollar deposits in China and investments in US government debt.
- Why
- Banks are seeking better returns amid low domestic yields, while attracting dollars may reduce pressure for them to be converted into yuan.
- Reported Treasury yield
- The 10-year US Treasury yield was around 4.76%, more than 30 basis points higher than at the beginning of June.
- Large dollar deposits
- Customers with more than $50,000 could negotiate dollar deposit rates above 3% at major state-owned banks since June.
- Smaller-bank rates
- Some smaller banks and foreign lenders offered dollar deposit rates approaching 4% since August.
- Yuan deposit rate
- Major Chinese state banks offered about 0.95% on yuan deposits.
- China’s foreign-exchange deposits
- They reached $1.18 trillion at the end of July, up 17.9% year over year.
- Reported US Treasury holdings
- China held $633.4 billion through US custodians in June, down 13% from a year earlier.
- Uncertainty in holdings data
- Some Chinese Treasury holdings may be held through custodians in Luxembourg and the Cayman Islands.