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People's Daily Online>>China Business

China buys less US debt in October

(Shanghai Daily)

08:33, December 16, 2011

China bought less United States Treasury debt in October, and total foreign holdings dipped for the first time since July.

Total foreign holdings of Treasury debt dipped 0.1 percent to US$4.66 trillion, the Treasury Department said yesterday.

China, the largest foreign holder, bought 1.2 percent less to bring its total holdings to US$1.13 trillion. China had increased its holdings 1 percent in September after a cut of 3.1 percent in August.

The small fall in overall holdings still left them at high levels that suggest foreign demand for US debt is strong. That strength came despite a prolonged debate this summer over increasing the nation's borrowing limit. Investors didn't appear to be concerned that Standard & Poor's downgraded the credit rating on long-term US debt in August.

S&P said it lowered the US credit rating because of political gridlock in Washington that had slowed the debt limit increase and not because the ratings agency thought the US couldn't pay its bills. US government debt is still considered a safe investment and it has been in high demand as worries about the European debt crisis have intensified.

Japan, the second-largest buyer of Treasury debt, boosted its holdings by 2.3 percent in October to US$979 billion. Britain, the third-largest holder, cut its holdings 3.1 percent to US$408.4 billion.

The 0.1 percent dip in overall holdings followed a 1.9 percent rise in September and a 2 percent gain in August. Overall foreign holdings of Treasury securities had fallen 0.4 percent in July and 0.3 percent in June. The declines had been the first overall drop since April 2009.

Net purchases of long-term securities, a category that includes not only US government debt but also bonds sold by US firms, showed a net rise of US$4.8 billion in October after a US$68.3 billion gain in September.

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