China Pivots Hard: Dumps US Treasuries for Bitcoin and Gold in Historic Shift

Beijing makes a seismic move in global finance—liquidating dollar reserves to double down on hard assets. Gold gets a nod, but Bitcoin emerges as the real winner in this strategic reallocation.

Markets brace for ripple effects as the world’s second-largest economy ditches the petrodollar playbook. Treasury yields spike while crypto and precious metals rally.

One hedge fund manager quipped: ’When the PBOC starts FOMO-buying BTC, maybe Jamie Dimon will finally stop calling it a ’fraud’.

China builds bigger Bitcoin and gold positions

The latest numbers show that China held $784.3 billion in US Treasuries by the end of February, based on the US Treasury Department’s data.

China’s gold pile was worth around $229.6 billion at the end of March, the Economic Times reported on April 21. On top of that, China is sitting on 194,000 BTC, valued at about $18 billion, according to Bitbo’s Bitcoin Treasuries.

Guy Cecala, executive chair at Inside Mortgage Finance, told CNBC that China has real power to shake the US markets. He said, “If China wanted to hit us hard, they could unload Treasuries. Is that a threat? Sure it is.” Cecala said Treasury securities are the foundation of US government financing, so any big sell-off would hit the system hard.

China also owns a massive amount of mortgage-backed securities (MBS), part of the $1.32 trillion in US MBS owned by foreign countries, based on an analysis from Ginnie Mae. Besides China, big holders include Japan, Taiwan, and Canada. If China starts selling its MBS, and others follow, it could crush the MBS market and ripple across global finance.

Some experts think China will hesitate because dumping MBS would hurt its own assets. Melissa Cohn, regional vice president of William Raveis Mortgage, told Newsweek that a large sell-off would wreck China’s remaining investments and could destabilize global currencies.

Cohn added that China depends on keeping the renminbi (RMB) weaker than the US dollar to keep its exports cheaper and more attractive for American buyers. To do this, China has kept buying US debt for years.

Mortgage rates face pressure from China’s strategy

The MBS market heavily influences US mortgage rates. If China starts selling its MBS stash, prices would crash and mortgage rates would jump. Homeowners with adjustable-rate mortgages would be some of the first to get hit.

Eric Hagen, mortgage and specialty finance analyst at BTIG, told CNBC that “most investors are concerned that mortgage spreads would widen” if countries like China, Japan, or Canada decided to retaliate financially.

As of April 17, the 30-year fixed mortgage rate stood at 6.83%, reported by Freddie Mac. That is already squeezing many American homeowners.

If rates rise more because of an MBS dump, refinancing will be less attractive or even impossible for some. Refinancing would mean higher monthly payments instead of savings.

First-time homebuyers would feel the blow, too. Higher mortgage rates would knock many buyers out of the market, and home sellers might stay on the sidelines, waiting for prices to recover.

Higher rates also raise borrowers’ debt-to-income ratios, which could push banks to tighten lending rules even more. Lenders might demand higher credit scores or bigger down payments to reduce their risks.

Jacobs said BlackRock believes that geopolitical fragmentation is the big driver behind these changes. He said Bitcoin is not just another asset but a direct result of a world that’s becoming more divided.

While stocks and bonds need stability, crypto like Bitcoin feeds off the instability that China and other powers are preparing for.

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