Japan Eclipses China as Top U.S. Treasury Holder

Beijing had expressed fears about the safety of its dollar-linked assets in view of the burgeoning budget deficit.

China's holdings of U.S. Treasury bonds tumbled in December, allowing Japan to take over as the top holder of American government debt, according to Treasury data released on Feb. 16.

China's bond holdings dropped substantially to $755.4 billion in the last month of December from $789.6 billion in November. While Japan's holdings increased to $768.8 billion in December from $757.3 billion in November.

Britain was the third biggest holder of U.S. Treasury bonds, worth $302.5 billion in December, rising from $277.6 billion in November.

China had grabbed the top position from Japan in September 2008 and gradually increased its U.S. bond holdings in relation to Tokyo until December last year, Treasury figures showed.

Beijing had expressed fears late last year about the safety of its dollar-linked assets in view of Washington's burgeoning budget deficit and the declining greenback at that time as the American economy struggled to emerge from a brutal recession.

U.S. Treasury Secretary Timothy Geithner traveled to Beijing in June to reassure Chinese leaders, saying their money is "very safe" despite the U.S. budget deficit, which he pledged to cut.

But Chinese state media expressed opposition to Beijing's policy of buying massive amounts of U.S. debt, saying the value of China's assets could be battered as a result of the global financial crisis.

U.S.-China relations have deteriorated in recent months with problems seen on multiple fronts. In the latest dispute, President Barack Obama's administration rebuffed Beijing's demand to cancel his meeting this week with the Dalai Lama. The deepening public spat over Tibet, a row over U.S. arms sales to Taiwan, China's dispute with Google and trade and currency disagreements, come at a key diplomatic moment, as Obama seeks Chinese help to toughen sanctions on Iran.

Copyright Agence France-Presse, 2010

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