China's US Treasury stock at 16-month low

BEJING - China cut its holdings of United States Treasury bonds to the lowest level in 16 month in November in a step that analysts said was meant to continue the diversification of the country's foreign exchange reserves amid global uncertainties.

According to data from the US Treasury Department, China's holdings of US Treasury bonds stood at $1.1326 trillion by the end of November 2011, $1.5 billion down from the previous month. It was the second successive month that the amount had declined, and the lowest reserve level seen since July 2010.

China made six monthly cuts of US debt in 2011, the department's data showed, trimming its holdings by $27.5 billion from the end of 2010. Yet despite the reductions, China remains the top buyer of US Treasury securities.

Meanwhile, a surge in international demand pushed up the amount of foreign holdings of US Treasury debt by 1.7 percent in November to hit $4.75 trillion.

Japan remains a strong net buyer of US Treasury bonds, bringing its holdings of the securities to a record high of $1.039 trillion and threatening China's position as the top holder. Britain, the third largest holder of US Treasury debt, also increased its holdings by 4.4 percent to reach $429.4 billion.

"The 'risk-aversion' sentiment caused by a deteriorating eurozone crisis has prompted the demand for the government bonds issued by developed countries, such as the US," Dagong Global Credit Rating Co, a Chinese rating agency, said in a research note.

"However, this does not imply the improvement of solvency in these countries, but only the limited investment choices under the current international monetary system."