Wall Street analysts suspect China is parking hundreds of billions in US debt at Canadian banks, letting Beijing look less dependent on America while still bankrolling US deficits.
Canada’s reported holdings of American government debt and federally backed mortgage bonds have soared to nearly $600 billion, more than four times their level five years ago, the Post reported. Over the same broad stretch of years, China’s reported holdings of US Treasuries have fallen by roughly half since 2016, to $618 billion.
That gap has set off a sharp theory on Wall Street. Analysts argue Beijing may not be dumping America so much as rerouting the paperwork, parking US bonds at Canadian banks so the holdings show up in Treasury data as Canada’s, not China’s.
If true, the arrangement would let China look less tied to the dollar while it keeps helping finance Washington’s deficits. It would also fit a familiar pattern: strategic opacity from a major creditor that runs a huge trade surplus and still needs somewhere to put the dollars.
US Treasury figures tracked by Bloomberg show Canada’s reported holdings of mortgage-backed securities, bonds tied to US home loans and backed by federal housing agencies, jumped to about $162 billion. In mid-2021, that figure was roughly $21 billion.
China’s reported holdings of similar mortgage bonds have fallen nearly 50% since the beginning of 2024. The mirror image is hard to ignore.
A dozen mortgage investors and strategists told Bloomberg they were unaware of Canadian investors buying US mortgage-backed securities on anything close to that scale. Vitaliy Liberman, a mortgage-debt specialist at DoubleLine, said Wall Street contacts he consulted pointed to China as a possible explanation for Canada’s surge.
The mechanics are simple enough. Treasury data can show which country holds a bond on the books without always revealing who actually owns it. If China moves investments to a Canadian bank that holds the securities on its behalf, the records can list them as Canadian.
China’s trade surplus exceeds $1 trillion. That leaves enormous sums of dollars that have to go somewhere. Dumping US bonds in size would risk driving down the value of what Beijing still holds. Converting those dollars into yuan on a large scale could strengthen China’s currency and make its exports more expensive.
Keeping the exposure, while making it harder to see, solves both problems on paper. It also lets Chinese officials talk as if they are reducing dependence on America without fully giving up the asset class that has absorbed so much of their surplus.
Brad Setser, a former US Treasury official who tracks international capital flows, put the point in blunt terms to Bloomberg.
"The story here is that China has been much better at hiding its dollars than it’s been about getting out of the dollar,"
That line captures the core suspicion. The retreat in China’s reported Treasury holdings may be less a clean break than a custodial shell game.
Not every strategist is ready to treat the Canada spike as a pure China story. Alex Etra, senior macro strategist at Vanda Research, struck a careful note with Bloomberg.
"I’m not quite comfortable saying clearly this is all China,"
There is no direct public evidence tying Beijing to the full run-up in Canada’s reported holdings. Canadian hedge funds and other buyers could explain part of the move. The Post’s account makes that limit plain, and the open questions remain real.
China’s foreign-exchange regulator declined to comment to Bloomberg. Canada’s banking regulator said it does not discuss client activity. The Post sought comment from the Treasury Department and from the Chinese and Canadian governments.
Silence does not prove the theory. It also does nothing to kill it. When reported Canadian holdings multiply while China’s official line falls, and when market veterans cannot find a matching Canadian buyer base, the burden shifts back to the governments that know the custody trails.
Washington still needs deep demand for Treasuries and for the mortgage securities tied to the US housing system. China still generates more dollars than it can easily park at home. The incentives line up for concealment if Beijing wants the political look of distance without the market cost of a true exit.
That is the uncomfortable read of the data. Official Chinese holdings of US Treasuries are down by about half since 2016. Canada’s reported stack of US government debt and agency mortgage bonds is near $600 billion. Mortgage-bond holdings alone in Canada rose from roughly $21 billion in mid-2021 to about $162 billion.
Those are not small rounding errors. They are large enough to matter for how the United States understands who funds its deficits, and how much leverage a strategic competitor retains while claiming to step back.
Setser’s assessment is the cleanest summary the market has offered so far: China looks more skilled at hiding dollar exposure than at leaving it. Until Treasury, Ottawa, or Beijing produces a better explanation for Canada’s outsized totals, that suspicion will keep hanging over the numbers.
A country that runs trillion-dollar surpluses and still needs US assets will not advertise every door it uses. America should stop pretending the official labels tell the whole story.
