Bold Move of china to Redefine Global Reserve Strategy:China is reshaping its foreign exchange reserve strategy by cutting back on US Treasury holdings and rapidly increasing its gold reserves. This shift highlights a broader global trend toward de-dollarization and a preference for hard assets like gold.
From Dollars to Gold: Bold Move of china to Redefine Global Reserve Strategy
China has been making a clear and calculated shift in the composition of its foreign exchange reserves, marking a broader trend of de-dollarization. Over the past decade, and particularly since 2016, the share of US Treasury holdings in China’s total FX reserves has been steadily declining. From nearly 37% in 2016, US Treasuries now account for just about 22% of China’s reserves—one of the lowest levels seen in the past 15 years.
This significant drop of around 15 percentage points reflects a deliberate strategic move by Beijing to reduce its dependence on the US dollar.
At the same time, gold has emerged as a key component of China’s reserve diversification strategy. While gold accounted for only about 1.8% of Chinese FX reserves in early 2016, that figure has now surged to a record high of approximately 6.8%. This nearly 5 percentage point increase marks a dramatic rise in China’s gold holdings, with the majority of this shift occurring in the past three years.
Since 2022, the trend has sharply accelerated. The share of gold in China’s reserves has more than doubled during this period alone. This reflects a clear preference by Chinese policymakers for hard assets over US sovereign debt, especially amid growing geopolitical tensions and concerns over the long-term stability of the US dollar.
During this period, China has added roughly 200 tonnes of gold to its reserves, signaling a strong and sustained demand for the precious metal.
The broader implications of this strategy are significant. China’s move away from US Treasuries suggests a decreasing willingness to rely on the American financial system as a safe haven. Instead, by increasing its gold holdings, China is positioning itself with more resilient, globally recognized assets that can better withstand economic volatility and currency risk.
Gold’s intrinsic value, lack of counterparty risk, and role as a hedge against inflation and currency depreciation have made it increasingly attractive not just to China, but to other emerging economies pursuing similar strategies.
This transformation in reserve strategy underscores a growing shift in the global financial order, where reliance on the US dollar is no longer seen as the only viable option. As China continues to acquire gold and reduce its exposure to US Treasuries, it sends a clear signal to the world that the era of USD dominance in global reserves may be entering a new phase of diversification and balance
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