A teller counts U.S. dollar bills at a bank in Qionghai, south China's Hainan Province.Photo:Xinhua

Chinese holdings of US Treasury bonds fell further to $769.6 billion in October, marking a seventh consecutive monthly drop, according to data released by the US Department of the Treasury on Tuesday.

As the second largest holder of US government debt, China’s holding in October came down by $8.5 billion from September. It marks the 19th consecutive month that China's holdings of US Treasury notes have been below $1 trillion. 

China's overall holdings of US Treasury bonds have decreased by a total of $97.5 billion within 2023.

The “mismatch between supply and demand” of US Treasury bonds, combined with the US Federal Reserve's monetary tightening measures, has created downward pressure on the appeal of US bonds, and the adjustment is also “a proactive move by China” to optimize and diversify its holdings of overseas assets, analysts said.

Among the top 20 foreign government investors, nine chose to reduce their holdings in US government debts in October, amounting to a total dump of $39.1 billion. Japan and the UK increased their holdings by $11.8 billion and $24.1 billion respectively. Luxembourg and Belgium reduced their holdings by $28.2 billion and $31.6 billion respectively.

The overall size of US Treasury Securities held by foreign investors, decreased for the second consecutive month in October to $7.565 trillion, dropping from $7.604 trillion in September.

The trend shows that overseas investors have shown a waning preference for the US Treasuries due to concerns about the US government's increasing federal deficit and the global move toward de-dollarization, analysts said.

The International Monetary Fund (IMF) has warned that the US debt situation appears increasingly unstable, pressured with high interest rates and rising corporate default rates.

IMF research director Pierre-Olivier Gourinchas recently noted that the US fiscal deficits deteriorated in 2023. 

Over the past few decades, the accumulation of the US government debt has been mounting. According to the US Congressional Budget Office, it is predicted that by 2052, the size of US federal debt could reach 185 percent of its GDP.