Core Viewpoint - China's holdings of U.S. Treasury bonds have been declining significantly, with a notable reduction of $53.7 billion from March to July this year, reaching a low of $730.7 billion in July, the lowest since the end of 2018 [1] Group 1: Reasons for Reducing U.S. Treasury Holdings - The "safety myth" of the U.S. dollar is weakening, as countries are concerned about the potential freezing of their dollar assets following the U.S. actions against Russia [1] - Continuous depreciation of the dollar and fluctuating U.S. Treasury yields allow China to manage its foreign exchange reserves more flexibly, supporting currency stability [1] - The trend of financial decoupling between China and the U.S. is accelerating, with U.S. Treasury bonds shifting from a cooperative asset to a bargaining chip in the geopolitical arena [1] Group 2: Strategic Asset Diversification - China's reduction of U.S. Treasury holdings is not merely a defensive move but also a proactive adjustment of its global asset structure [1] - There is a growing preference for diversifying into assets such as gold, euros, yen, and emerging market assets, which helps in risk dispersion and gaining more leverage in the global financial system [1]