A significant amount of academic literature exits on the United States’ trade deficit, and its financing through foreigners’ purchases of U.S. securities. Over the last several years, the trade relationship between The U.S. and China has received considerable attention as China has acquired large positions in U.S. securities. This study examines the dynamics of how China has allocated its portfolio of short-term and long-term U.S. Treasury securities relative to its holdings of U.S. equity, corporate debt, and asset-backed securities. We find that changes in Chinese holdings of short-term Treasuries are well explained through portfolio allocation dynamics, while changes in Chinese holdings of long-term Treasuries are not well explained by portfolio allocation dynamics.