Chinese Banks Increase U.S. Treasury Holdings in Recent Months, Driven by Higher USD Deposit Rates
nashnova research
Several Chinese commercial banks have been steadily buying U.S. Treasuries in recent months, driven by rock-bottom domestic bond yields and rising U.S. rates — a shift that may also be capping the renminbi's recent rally.
Why are Chinese banks suddenly buying Treasuries?
Domestic Chinese bond yields remain stubbornly low, and regulators have flagged concern over banks' over-concentration in onshore bonds.
Meanwhile, the U.S. 10-year Treasury yield has climbed more than 30 basis points since early June, now at 4.76%.
This means → onshore safe assets pay too little; banks are being pushed offshore for yield, and Treasuries are the obvious substitute.
Where is the money coming from?
China's "Big Five" state banks have capped most dollar deposit rates at 2.8% since 2023, but accounts above $50,000 can now negotiate above 3% starting in June.
Some smaller and foreign banks have offered rates approaching 4% since August; a few smaller lenders are even advertising dollar deposits on social media.
In plain terms = banks raise rates to attract dollar deposits, then use those dollars to buy Treasuries and pocket the spread — a classic "borrow the hen to get the egg" play.
Why not just convert renminbi into dollars?
Sources say regulators have tightened scrutiny of offshore investment recently, making banks reluctant to convert renminbi into dollars on their own.
This reflects a practical bind: banks want more dollar assets, but the FX channel is constrained — so they must rely on attracting existing dollar deposits instead.
Reuters says it could not verify the scale of purchases or whether the buying materially affects China's overall Treasury holdings.
What does this mean for markets?
Banks buying Treasuries drains onshore dollar liquidity and may partly cap the renminbi's recent gains.
Whether the trend lasts hinges on two variables: whether dollar deposit inflows stay stable, and whether regulators tighten offshore allocation rules further.
This means → this is not a definitive strategic pivot — it is a stopgap by banks squeezed for yield, and regulators could hit the brakes at any time.
市场有风险，内容仅供研究参考，不构成投资建议。