Core Insights - In 2025, a rare "dual sell-off" occurred in the global bond market, with foreign capital reducing holdings in Chinese bonds by 370 billion yuan over three months while simultaneously purchasing US Treasury bonds, net buying 58.2 billion USD in July alone, pushing total US debt holdings to a historic peak of 9.159 trillion USD [1][3][5] Group 1: Foreign Investment Trends - Foreign investors have been continuously reducing their holdings in Chinese bonds, with a total withdrawal of 370 billion yuan from May to July 2025, marking a five-year low in total holdings around 4 trillion yuan [1][7] - In contrast, foreign holdings of US Treasury bonds surged to 9.159 trillion USD in July 2025, with Japan and the UK leading the buying spree, the latter replacing China as the second-largest holder of US debt with nearly 900 billion USD [3][5] Group 2: Market Dynamics - The core factors driving these trends include the trade policies of the Trump administration, which imposed tariffs of 10% to 50% on imported goods, causing market turbulence and leading to a significant influx of capital into US Treasuries as a safe-haven asset [5][7] - The anticipated interest rate cuts by the Federal Reserve further stimulated capital inflow, with expectations of a 25 basis point cut in September, which would increase existing bond prices and provide capital gains for investors [5][7] Group 3: Structural Adjustments - The reduction in Chinese bond holdings primarily affected negotiable certificates of deposit and policy financial bonds, with the former declining by 13% and the latter by approximately 5%, indicating a preference for short-term arbitrage opportunities [9] - Despite the reduction, foreign holdings still represent only 2.3% of the total Chinese bond market, which stands at 25 trillion yuan, suggesting that the fundamentals of the market remain intact [7][9] Group 4: Global Capital Flow Diversification - The capital flow is not merely a "side-taking" phenomenon; in the first half of 2025, funds also diversified into markets such as Canada, Japan, and Germany, with China reducing its US Treasury holdings by 25.7 billion USD, reaching a new low since 2009 [12] - The trend reflects a diversification of global reserves, with the cross-border payment scale of the yuan increasing significantly from an average of 200 billion yuan in 2010 to 1.4 trillion yuan in 2025, indicating that yuan assets are becoming essential rather than optional [12]