The Silent War between China and the Dollar has just gained a major new chapter.

Chinese regulators have instructed banks to divest themselves of US Treasury bonds.

This is a strategic move against the dollar's "exorbitant privilege."

Understand the mechanism and its global impact.

1. What Does "Selling Bonds" Mean?

When China bought Treasuries, it financed the American government.

By selling, it removes this liquidity from the market.

China is the second largest creditor of the US (behind only Japan), and this forced exit puts pressure on the market with bonds that demand a higher premium to be absorbed.

2- The Mechanics (Law of Supply)

Here's the secret:

If a large player sells massively and demand doesn't keep up, the price of the bond falls.

To attract new buyers, the US Treasury needs to pay higher interest rates.

Result: Yields (future rates) rise, making credit more expensive worldwide.

3- The Timing (Record Debt)
The move is happening at the worst possible time for Washington (and China knows it).

The US public debt has hit $37 trillion. They need to issue more and more paper money to roll over this debt.

If the second largest financier becomes a seller, who will cover the hole without demanding even higher interest rates?

Debt is growing at increasing rates… it's clearly not a good scenario.

4- The Reason (Geopolitics)
The scenario changed in 2022.

Seeing the US freeze Russia's reserves, Beijing understood the system:

"Your dollars are not yours. They are a permit to use them."

5-The Great Rotation (Gold)
Money doesn't evaporate, it changes hands.

While Chinese reserves in US Treasury bonds fell to US$682 billion (the lowest since 2008), gold reserves hit a historic record (2,308 tons).

They are exchanging Paper Debt for Real Assets.

We're not just seeing a trade. We're seeing the end of an era in which Asia unconditionally financed the American deficit.

With the American debt at $37 trillion and China exiting the game, the global "cost of money" is likely to become structurally more expensive.
For China, holding reserves in Treasuries became a national security risk. In case of conflict (e.g., Taiwan), the money could become worthless.