For the first time in over two decades, the United Kingdom has surpassed China as the second-largest foreign holder of U.S. Treasury securities. This development marks a significant moment in the evolving dynamics of global finance and geopolitics.
What Has Happened?
According to March 2025 data from the U.S. Department of the Treasury, the UK now holds $779.3 billion in U.S. Treasuries—more than China’s $765.4 billion. This shift places the UK just behind Japan, which remains the top holder with $1.13 trillion in U.S. government debt.
The last time the UK held a larger amount than China was in the year 2000, making this a historically noteworthy reversal.
Why Did the UK’s Holdings Increase?
The UK’s rise in U.S. Treasury holdings is not primarily driven by trade surpluses, unlike Japan or China. Instead, it reflects London’s position as a global financial hub. Many international investors—including U.S. tech companies, pharmaceutical firms, and sovereign wealth funds—use UK-based financial institutions to manage their capital. When these institutions invest in U.S. Treasuries on behalf of their clients, the holdings are recorded under the UK’s name, even if the money originates elsewhere.
That said, domestic UK investors, such as pension funds and banks, have also turned to U.S. government debt as a safer alternative amid domestic market uncertainties and fluctuating gilt yields.
Why Are China’s Holdings Declining?
China’s reduction in U.S. Treasury holdings is part of a broader, long-term strategy to diversify its foreign reserves. From a peak of over $1.3 trillion in 2013, China has steadily cut back, now holding $765.4 billion.
Beijing’s evolving strategy includes shifting funds into gold, European bonds, and even cryptocurrencies. While China still buys Treasuries—as seen in February 2025 when it added $23.5 billion—its overall trajectory is one of cautious retreat. Analysts also point to China’s use of custodial accounts in countries like Belgium, which may obscure the full extent of its holdings.
What About Japan?
Japan continues to top the list, holding over $1.13 trillion in Treasuries. Its approach is rooted in managing the yen and supporting exports by converting trade-generated dollars into U.S. government bonds. Additionally, Japanese pension and insurance funds seek stable returns abroad, given that domestic bond yields remain near zero.
What Does This Mean for the U.S. and Global Markets?
This shift in ownership underscores a changing landscape in global finance. While demand for U.S. Treasuries remains high—total foreign holdings hit a record $9.05 trillion—the makeup of who holds that debt is changing.
China’s gradual retreat reflects broader geopolitical tensions and concerns about U.S. fiscal policy, especially amid trade frictions and shifting alliances. At the same time, the UK’s ascent highlights the increasing influence of global financial intermediaries over traditional state actors.
Bottom Line
The UK overtaking China as the second-largest holder of U.S. Treasuries is more than a numerical milestone—it signals a broader realignment in the flow of global capital. As nations recalibrate their strategies in response to geopolitical pressures, market volatility, and economic transformation, the ownership of U.S. debt will continue to evolve, shaping not just financial markets but international relations as well.
