China Buys, Norway Sells: $80B Treasury Split

Chinese commercial banks have been quietly buying more US Treasuries in recent months, Reuters reported on September 4, citing sources familiar with the matter. If you assumed China is dumping American debt, that assumption doesn't hold up here.

The same week, Norway's $2.3 trillion sovereign wealth fund proposed the opposite move. Norges Bank Investment Management (NBIM), which manages the fund, wants to cut its US Treasury weighting from 34.1% to 21.9%.

One side widely seen in Western markets as a "risk signal" is buying. The other, an AAA-rated fund considered among the world's most rational long-term investors, is selling. That split raises an obvious question: who's actually right about Treasuries right now?

Banks Buy While Beijing's Official Pile Shrinks

Here's the part that gets lost in the headlines: bank buying and national holdings are two separate stories. They cannot be merged into one line without misleading readers.

Official US Treasury data — known as TIC data, for Treasury International Capital — shows China's Treasury holdings falling to $633.4 billion at the end of June. That's down from $659.3 billion in May and the lowest level since September 2008.

So the sovereign-level trend is still downward. What's changed is that individual commercial banks, not the central bank or state reserves, appear to be buying on their own books, according to Reuters' sources.

The Deposit-Rate Trick Behind the Buying

Here's why banks would do this rather than just converting yuan into dollars directly. China's regulators watch banks' own currency conversions closely, and large outbound FX flows draw scrutiny.

Attracting depositors who already hold dollars sidesteps that check entirely. So banks have raised interest rates on US dollar deposits to pull in more dollar funding.

Large state banks are now offering 3% to 4%, Reuters reported. Some smaller and foreign banks have pushed rates toward 4% since August, up from a roughly 2.8% ceiling that held since 2023.

Once banks hold more depositor dollars, they can invest those dollars into Treasuries without personally triggering currency-conversion oversight. The deposits do the regulatory work for them.

This detail matters for how solid the story is. It comes from a single Reuters report citing unnamed sources, with no primary documents released. Other outlets have republished the same account rather than independently confirming it, so it should be read as a reported claim, not a settled fact.

One data point stands on firmer ground. China's foreign-currency deposits hit $1.18 trillion at the end of July, up 17.9% year-on-year. That's according to the People's Bank of China (PBOC), the country's central bank.

Norway's Cut Isn't a Dollar Retreat

NBIM's letter to Norway's Ministry of Finance, dated September 1 and made public September 4, doesn't read like a dollar exit. Total dollar-asset exposure would stay near 50%, largely unchanged.

What's shifting is the type of dollar asset. NBIM wants to cut government bonds overall from 70% to 50% of its fixed-income book, moving money into mortgage-backed securities and corporate bonds instead.

In plain terms: Treasuries currently pay too little extra yield for the risk NBIM sees in the market right now. Rather than leaving dollars altogether, the fund wants to chase better-paying corners of the same currency.

The math behind this is concrete. At current holdings of roughly $215 billion as of June, the cut would trim about $80 billion. That's according to Reuters' calculations of the letter's figures.

Why Both Bets Can Be Right

Chinese banks and Norway's fund aren't actually disagreeing about the same thing. Banks are chasing a funding opportunity created by rising dollar deposit rates. NBIM is repositioning for yield across an entire portfolio, not making a directional call on America's finances.

Both moves are unfolding against the same backdrop. 10-year Treasury yields have climbed to 4.76%, up more than 30 basis points since early June, according to public market data. Higher yields make Treasuries pay more, but also cut into their price appeal versus other dollar assets.

What comes next is worth watching on two fronts. Norway's Ministry of Finance hasn't yet responded to NBIM's proposal, and the ministry — not NBIM alone — makes the final call. Separately, the next TIC report, covering August holdings, will show whether China's official Treasury total kept falling even as bank-level buying reportedly continued.