China, America, Europe, Japan - Love and Kill Each Other? Money speaks for itself. Recently, the issue with Greenland led to friction between the United States and Europe, and the cooperation between Canada and China also caused friction between the two countries. The biggest variables in the entire 2025 market between China and the United States are trade disputes and supply chain redistribution. However, looking at the purchasing situation of US Treasury bonds, a total of $9.4T is held overseas, with Europe (not the EU) accounting for 33.4% of the total. Japan is also one of the largest holders in a single country and is still increasing its holdings, indicating that geopolitical conflicts can tear apart narratives, but it is difficult to immediately tear apart settlement and collateral systems. Firstly, the more conflicts there are, the more dollar assets resemble cash during wartime. Geopolitical conflicts bring about uncertainty in energy and shipping costs, increased risk of supply chain disruptions, and policy extremism (including sanctions, export controls, industry subsidies, and defense budget expansion). This will directly push up the risk premium, making global funds naturally inclined to return to US dollar liquidity+US bond collateral. So the overseas US bond holdings that can be seen are actually the most reflective of the difference between "friend and foe", presenting more obvious custody and allocation characteristics in the structure of a "financial center and ally system". Secondly, the high holdings in Europe are precisely the result of conflict financialization. In Europe, especially in countries such as the UK, Luxembourg, Ireland, and Belgium, it is often not that Europeans love the US more, but rather that global funds rely more on mature custody, clearing, repurchase, and derivative systems in conflict environments. And these systems are the easiest to register positions in European financial hubs. Talking to people is like when the world is more chaotic and funds need more channels, Europe is the channel, and the United States provides underlying assets. That's why we can see that Europe accounts for such a high proportion of US debt, reflecting financial infrastructure and funding paths, rather than emotional statements. Thirdly, Japan is a passive player in geopolitical conflicts. For Japan, geopolitical conflicts will amplify two types of pressure: A. Exchange rate pressure and energy price pressure. The more volatile the exchange rate, the more foreign exchange assets are needed as a buffer. B. The higher the risk, the more duration assets are needed to match liabilities for life insurance or pension. Combined with the need for necessary foreign exchange intervention, Japan's holdings of US bonds are more like a structural allocation, not whether it wants to buy or not, but rather the system has to hold them. This also explains why Japan often does not take sides like a slogan when friction and conflict escalate, but continues to maintain the stable weight of US dollar assets on the asset side. Fourthly, China's logic of reducing holdings is essentially a geopolitical conflict logic. The rise of conflict means the rise of tail risk. The Russia-Ukraine conflict has taught us a good lesson. Freezing risk, sanctions risk, payment channel risk, and even the risk of assets being politicized will all accompany the conflict. So China's reduction of holdings is more like risk management for foreign reserves, reducing single counterparty risk exposure, improving asset mobility, and increasing diversified allocation. Of course, reducing holdings does not mean decoupling, let alone exiting the US dollar system, because in reality, there are not many deep and liquid assets that can be replaced in the short term. This is love and killing, escalating political confrontation, yet still constrained by the same system in finance. Geopolitical conflicts can accelerate the outbreak of contradictions between finance, interest rates, and debt. Conflict means that defense spending, industrial subsidies, and localization costs in the supply chain will all rise, ultimately leading to a fiscal deficit. The larger the deficit and the higher the interest rates, the more interest expenses on US bonds will resemble an expanding black hole. The more conflicts there are, the more we need US bonds, the more we need US bonds, the higher the interest cost paid by the United States, the higher the cost, and the easier it is for policies to be backfired by the market. This is the real financial battlefield for the next few years, with the United States paying interest to other countries as high as $287 billion by 2025. So from the distribution of funds, the so-called "friend or foe" is actually very clear at the financial level. The United States, European financial hubs, and Japan naturally "stick together" in the same settlement and collateral system, not because they are more united, but because they share the same set of US dollar asset pools, custody clearing networks, repo markets, and risk hedging tools. The more chaotic the world becomes, the more stable the underlying collateral is needed for this system, and US bonds become more like standard ammunition for wartime cash. Although China is reducing its holdings, it is still one of the major holders of US Treasury bonds. This incident itself indicates that the confrontation between China and the United States can be escalated in terms of narrative, but a comprehensive reversal in the financial sector has not occurred, at least not yet in the stage of clearing positions. More realistically, it's not that we don't want to tear our faces apart, but rather that there are too few deep and liquid assets that can be replaced in the short term, and external reserve management cannot make decisions based on emotions. You can hate your opponent, but it's difficult to not use their system in the short term. PS: This situation also occurs in the field of cryptocurrency. You can criticize Binance every day, but when it comes to trading choices, you may still choose Binance, not because you like it much, but because of the depth and liquidity that make you have more choices that you don't have at times. @bitget VIP， Lower rates and more generous benefits