After cordial Xi-Trump summit, could China’s US dollar pivot cause tremors?

As President Xi Jinping and US President Donald Trump talked tariffs, agricultural quotas and critical minerals at last month’s closely watched summit in Washington, an “elephant in the room” loomed over the discussion: China’s efforts to gradually diversify away from US dollar assets.

Beijing has gradually been cutting its holdings of US Treasuries while pushing to expand the yuan’s global use and developing alternative financial architecture. While these issues may not have featured in the summit’s official communique, they have not gone unnoticed by economists and investors – or by policymakers on both sides of the Pacific.

Charles Chang, a finance professor at Fudan University, said topics such as China’s holdings of US debt were likely to have been raised during the talks, although he added they were unlikely to result in a formal agreement similar to those covering trade.

“Unlike tariffs, which can be set out as part of a policy framework, sovereign debt management involves actual capital allocation and is highly sensitive, making it unlikely to be formally addressed in official statements,” Chang noted.