Amid political uncertainties and expectations of a weaker yuan, Chinese conglomerates are snapping up U.S. and European companies, and Chinese individuals are purchasing U.S. real estate.
Buying in the U.S. dollar also has sent the dollar index to a 14-year high and the yuan to an eight-year low.
Meanwhile, Chinese authorities have been selling dollars and buying yuan in an effort to prop up the currency. The continued selling in Treasurys coincides with China's declining foreign exchange reserves, which fell in December to the lowest since February 2011 at $3.011 trillion. The figure did hold just above the psychologically key $3 trillion level.
Michael Pettis, professor at Peking University's Guanghua School of Management and author of "The Great Rebalancing," makes an economic argument for watching China's sale of Treasurys as an indicator on Chinese capital flight.
"Because Chinese residents are buying an amount of foreign assets that exceeds the current account surplus, the PBoC must sell enough foreign assets that makes net purchase of foreign assets equal to the Chinese current account surplus," Pettis said in an email. The current account is the difference between a country's savings and investments, and China has a surplus because it exports more than it imports.
As a weaker yuan spurs fears of sharper devaluation, triggering outflows that can escalate, the burden on Beijing is increasing. Chinese authorities have increased scrutiny of individuals' overseas cash transfers and sought to limit companies from making foreign purchases not related to their core business.
And if China can maintain gradual depreciation of the yuan and even strengthen it in the near term, that goes against a speculative one-way bet on a weaker currency.
"Selling Treasurys will temporarily boost CNY [the yuan] versus the U.S. dollar and that might please sentiment directly," said Lucy Qiu, emerging markets strategist at UBS Wealth Management.