Chinese Banks Boost US Treasury Holdings Amid Rising Dollar Deposits

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Chinese Banks Boost US Treasury Holdings Amid Rising Dollar Deposits

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In recent months, Chinese commercial banks have reportedly increased their acquisition of US Treasuries. This development follows a period where these banks have been actively raising interest rates on dollar deposits, attracting more foreign currency from customers.

This strategy marks a notable shift for Chinese lenders. Sources indicate that the purchases are driven by the search for more profitable and safe assets, given the comparatively low yields on domestic Chinese government bonds. The yield on the benchmark 10-year US Treasury, for instance, has risen to approximately 4.76% as of early September 2026, an increase of over 30 basis points since early June 2026. This creates an attractive spread for banks that are offering dollar deposit rates of 3% to 4%.

The increase in dollar deposits is significant, with foreign exchange deposits in China reaching $1.18 trillion by the end of July 2026, a 17.9% increase year-on-year. This influx of dollars, partly due to robust exports, has provided banks with the necessary foreign currency to invest in US debt.

Furthermore, this move by Chinese banks could serve to temper the appreciation of the yuan. By offering higher rates on dollar deposits, banks encourage customers to retain their dollars rather than converting them into yuan, thereby easing upward pressure on the Chinese currency. This aligns with broader efforts by Chinese authorities to manage the yuan’s strength, especially as the currency had gained nearly 9% against the dollar since early 2025.

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