By Wei Tian and Zhang Yuwei, China Daily, March 17, 2012 —
China increased its holdings of US Treasury securities by a slight $8 billion to a total of $1.16 trillion in January after cutting the purchase for five consecutive months, according to data released by the US Treasury Department on Friday.
But analysts suggested the move doesn’t signal a reversal of China’s efforts to diversify its foreign exchange holdings and reduce its exposure to dollar assets.
China remained the largest foreign creditor of the United States among the overall foreign net buyers of US financial assets in January. But Japan, as the second-largest holder of US Treasuries, is closing in on China after boosting its holdings by $21 billion to $1.08 trillion in January.
China had been moving away from US Treasury bonds since July, continuously cutting its holdings by a total of $163 billion by December.
By the end of last year, China had reduced its holdings of US debt by $8.2 billion compared with the previous year, the first time it had reduced the amount year-on-year since 2001.
Some analysts say the January purchase was made because the US, even with a weak economy, is still a safe haven for foreign investors, especially given the lower expectation of the third round of quantitative easing by the US Federal Reserve and the ongoing eurozone crisis.
But Mei Xinyu, a senior researcher with the Ministry of Commerce, said that the small amount of increase doesn’t necessarily indicate new investments in US debt, as it might be retained income on investments from last year.
US Treasury bonds currently account for one-third of China’s $3.18 trillion foreign exchange portfolio. . . .