China reduces US debt holdings in December

08:15, February 16, 2011      

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China, the biggest buyer of US government debts, reduced its holdings in December for the second straight month, the Treasury Department said yesterday.

China's holdings of Treasury debt dropped 0.4 percent to $892 billion. The declines follow four months of increases, the Associated Press quoted the department data as saying.

China's ownership of US government debt, now slightly below the $895 billion it held a year ago, is a small-step tactical restructuring of its forex reserve investment portfolio. The country has been buying sovereign bonds of a wider variety of governments, including more European countries, to diversify its holding portfolio, Chinese analysts said.

Overall, foreign holdings of US Treasury securities rose 0.6 percent $4.37 trillion. Britain and Japan ramped up their purchases of US government debt in December, the AP report said. Japan, the second-largest buyer of US government debts, boosted its holdings 0.7 percent to $883.6 billion, while, Britain, the third-largest, increased its holdings 5.8 percent to $541.3 billion.

The U.S. government is selling huge amounts of debt to finance record-high deficits. This year's deficit is forecast to reach $1.6 trillion, the highest ever.

Overseas demand for Treasury bonds helps lower the interest rate the U.S. government pays on its debt. If the United States had to finance its debt through U.S. investors alone, the government would have to pay higher rates, the report said.

By People's Daily Online
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