China no longer largest holder of US debt

China has let its position as the largest holder of US Treasury debt lapse in favour of Japan even as it reduced its holdings of  such securities by more than $34 billion in December to $755.4 billion. This is down 4.3 per cent from $789.6 billion in November.

Japan's holdings for December were up 1.5 per cent at $768.8 billion. China had replaced Japan as the largest foreign creditor to the US since September 2008.

Treasury Department data revealed that China had allowed short-term Treasury bills to mature and replaced them with a smaller amount of longer-term notes and bonds.

China holds the world's largest foreign exchange reserves of nearly $2.4 trillion at the end of last year.

Economists feel that it may now be moving to diversify assets and move away from US securities to other investments. The communist nation has been, over the past year, expressing concern at record US budget deficits saying these had the potential to undermine the value of its dollar-denominated assets.

China central bank governor, Zhou Xiaochuan, has backed calls by some other nations to introduce a new global currency in order to reduce reliance on the dollar.