The United States owes 39 trillion and cannot pay it back at all. China quietly breaks the dollar monopoly with a triangular debt operation.

The U.S. funds report released in June 2026 made Wall Street uneasy.

By the end of April, our holdings of U.S. debt decreased by another $1.2 billion, leaving only $651.1 billion, the lowest in 18 years. But what truly unsettles the U.S. is not the reduction, but the "disappearance" of tens of billions of dollars in U.S. debt.

It was neither sold to traditional buyers like Japan or the UK, nor were there signs of large-scale sell-offs in the secondary market. So where did this money go? The answer lies in the cross-border RMB transaction data.

In the first quarter of this year, the cross-border debt restructuring and off-exchange U.S. debt transfers settled in offshore RMB surged by 340%, reaching a total scale of 1.2 trillion. These two seemingly unrelated data points reveal a new game—dubbed "international triangular debt" by insiders, which essentially bypasses the dollar and uses the RMB to solve global dollar debt problems.

Many people don't understand: why don't we just sell the hundreds of billions of U.S. debt we hold? In fact, it's all about practical difficulties.

If we dump a large amount of U.S. debt on the open market, bond prices would plummet, causing the remaining U.S. debt we hold to sharply depreciate, which means a huge loss for us. But holding onto it is also unsettling, as the total U.S. debt is approaching $39 trillion, with annual interest payments alone exceeding one trillion, relying entirely on issuing new debt to repay old debt, with bubble risks growing.

What makes it even more insecure is that in recent years, the dollar has been frequently used as a sanction tool, freezing other countries' assets without hesitation. Pinning all foreign exchange reserves on the dollar carries extremely high risk.

Since a direct approach is not feasible, we have adopted a mild but highly lethal off-exchange strategy. The process is easy to understand:

We sell the U.S. debt nearing maturity to countries that need dollars to repay their debts. The counterparty does not need to pay in dollars; they directly settle in RMB. After obtaining the U.S. debt, they use it to offset their own dollar-denominated debts owed overseas. The entire transaction does not involve dollar settlement, nor does it use the SWIFT dollar clearing system.

Argentina is the most obvious example. This year, Argentina has $8 billion in foreign debt to repay, but its total usable dollar reserves are only $3 billion, leaving a significant shortfall, and it was on the verge of default.

A Chinese institution transferred $800 million in short-term U.S. debt to Argentina's central bank via a bilateral currency swap, priced at 6 billion RMB. Argentina then used this batch of U.S. debt to negotiate directly with creditors, wiping out the dollar-denominated debt entirely. The whole process had nothing to do with dollars, perfectly avoiding the dollar shortage.

The U.S. has actually been aware of this for some time. In closed-door congressional meetings, officials admitted they are studying how to respond to this transaction model that bypasses the dollar, but they are powerless.

The logic is simple: two sovereign nations voluntarily trade U.S. debt in RMB as an off-exchange private asset transfer, not participating in U.S. on-exchange transactions. No matter how assertive U.S. jurisdictional legislation is, it cannot regulate cross-border autonomous transactions. Politicians can only make a few public criticisms, but they have no practical means to enforce restrictions.

Never mistake this operation for simply "dumping U.S. debt." The two are completely different in nature.

Directly selling off U.S. debt only reduces holdings in the short term, and the Federal Reserve can stabilize the market by printing money. However, the triangular debt model fundamentally changes market demand for U.S. debt. Now, when countries buy U.S. debt, it is no longer for long-term wealth preservation but merely to hedge against dollar-denominated obligations. The number of long-term funds willing to hold U.S. debt is shrinking, gradually weakening the underlying support for dollar bonds.

This model works because we have signed local currency swap agreements with more than 40 countries worldwide, totaling over 4 trillion RMB. Previously seen as mere formalities, these agreements have now become a "lifeline" for countries facing dollar crises. Offshore central banks no longer need to accumulate RMB over years through trade; holding Chinese government bonds allows them to exchange for RMB cash flow, significantly broadening the circulation channels for RMB.

For decades, the global economy followed a fixed cycle: developing countries sell goods for dollars, then use those dollars to buy U.S. debt, tightly tied to the dollar.

Now a new cycle has taken shape: we use our existing U.S. debt holdings as leverage to offer an alternative for all countries trapped by dollar-denominated debt. The previously straightforward dollar lending relationship is gradually evolving into a credit network centered on the RMB.

Objectively speaking, the dollar remains the dominant global reserve currency, and the internationalization of the RMB will take time. But the wind has already shifted.

In the past, when countries faced dollar crises, they had no choice but to borrow from the International Monetary Fund, accepting harsh economic restrictions. Now, there is another option: resolving debt through the RMB. As more countries proactively hold and use the RMB, the financial landscape dominated by the dollar is bound to gradually loosen.

The core of currency is trust, and this debt closure system is turning the RMB into a reliable hedge against dollar risks worldwide.

#美债 #De-dollarization #人民币国际化 #International Finance