As China continues to cut its US Treasury holdings – reaching a near 17-year low in July as concerns over assets backed by the US dollar mount – analysts said the country’s central bank could be pivoting to European assets and perennial safe haven gold as more reliable investments.

Beijing’s stockpile dropped to US$730.7 billion in July, down US$25.7 billion from June, according to data released by the US Treasury Department on Thursday.

July’s figure was the lowest reported since January 2009, and a 45 per cent plunge from the record US$1.32 trillion recorded in November 2013, according to Chinese financial data provider Wind.

Ding Shuang, chief Greater China economist at Standard Chartered, said while it remains unclear how the People’s Bank of China is specifically allocating its foreign exchange reserves, international investors have been gradually shifting from US dollar-denominated assets to those backed by European currencies this year.

“Looking ahead, the depth and breadth of European bonds is likely to continue to expand, which could potentially provide an alternative [for the PBOC],” he added.

Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, held a similar view, adding that China might also be increasing its holdings of the euro – given a rise in exports to Europe in recent months – as well as other currencies such as the British pound and Swiss franc, which could be contributing to the rise in its foreign exchange reserves.

The decline in China’s Treasury holdings comes as the country’s economists continue to warn of the weaponisation of the US dollar amid rising tensions between the two superpowers, coupled with ongoing concerns over the sustainability of US debt.