China Cuts Back U.S. Treasury Bond Holdings

Some U.S. experts had told a Congressional forum last month that China appeared to be secretly buying bonds via third locations to hide its importance as a major creditor to Washington.

While China still remains the top owner of U.S. government debt, it did cut back its Treasury bond holdings in January, the Treasury Department said on March 15.

China held $889 billion in Treasury securities at the end of January compared with $894.8 billion in December.

Japan was far behind on the number two spot with $765.4 billion in Treasury bonds, little changed from its December figure of $765.7 billion.

The Treasury Department created a stir last month when it announced China had slashed its bond holdings to $755.4 billion in December -- the biggest drop since August 2000, allowing Japan to become the top holder of American government debt. But two days later, the department produced sharply revised data indicating that while China had cut back on its bond holdings, the level was still well above that of Japan. The revision came when the department looked at Chinese holdings in U.S. Treasuries held in third markets such as Britain and Hong Kong, which were not picked up by the earlier estimates.

Some U.S. experts had told a Congressional forum last month that China appeared to be secretly buying bonds via third locations to hide its importance as a major creditor to Washington, experts told a congressional forum on March 11.

They said China-linked entities may be scooping up U.S. bonds in London, Hong Kong or other locations, pointing out that official data almost certainly understates Beijing's U.S. government debt holdings.

Some say the massive holdings by China have implications for U.S. national security, making it harder for Washington to carry out policies in conflict with Beijing.

Copyright Agence France-Presse, 2010

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