China-US: Economic tensions make gold and crypto shine
Economic relations between China and the United States remain difficult in May 2025, oscillating between temporary pauses and persistent tensions. The recent 90-day suspension of tariffs does not seem to be enough to establish a real climate of trust.
Beijing has decided to send a strong signal by substantially reducing its holdings in the US debt securities, increasing the odds of a new escalation.
In March 2025, China divested itself of $18.9 billion in US Treasury bonds, bringing its portfolio down to $765.4 billion and putting it in third place among the USA’s creditors. To compare, Japan holds $1,130 billion, and the United Kingdom holds $779.3 billion, thus overtaking China for the first time in 20 years.
Strategic repositioning rather than complete withdrawal
This decision does not mean that Beijing is completely withdrawing from the US market; rather, it means that Beijing is strategically adjusting its position. China now seems to be favoring short-term bonds, which are less risky and more liquid. Further, it diverges its reserves into other assets, such as gold and cryptocurrencies. State-owned banks are also reducing exposure to the dollar.
Meanwhile, other countries such as Japan, Canada, and the Cayman Islands have strengthened their positions, suggesting a subtle recomposition of global financial flows.
Gold and Bitcoin as strategic alternatives
With this backdrop, China’s interest in alternatives like gold and Bitcoin is more necessary than it has ever been.
Gold would enable Beijing to store wealth outside the dollar-dominated financial system.
While more volatile, Bitcoin could play a complementary role in a diversification strategy.
Furthermore, the price of gold and Bitcoin have performed very well this year.
Analysts such as those at BlackRock do not rule out a gradual rise in the importance of cryptocurrencies in the official reserves of certain countries.
For China, this would strengthen its financial sovereignty, protect it against any form of Western pressure, and help to redefine the global monetary balance.
Warning signs for the global economy
The reduction in Chinese holdings of US debt, although occurring in a generally bullish context (adding $233 billion for all foreign creditors), is a warning sign for the global economy. It highlights the United States’ dependence on its financial partners and raises the question of the limits of this relationship.
This move could mark the beginnings of a well planned de-dollarization movement at a time when US bond yields are becoming more volatile and the dollar index is falling. Against this backdrop, a sort of balancing act is setting in with financial cooperation and geopolitical rivalry between China and the US.
While the Chinese government is not yet abandoning the dollar, it is clearly seeking to reduce its vulnerability against any unilateral moves from Washington. And that gradual rebalancing could inspire other countries to diversify their reserves.
The future will largely depend on the political choices made by the two giants, and any tightening restrictions by the US could bring up a new phase of tension with consequences on the global economy.