China lowers US bond holdings by 2.8%

NEW YORK: China, the largest foreign lender to the US, reduced its holdings of Treasuries in December to the least since June 2010 amid efforts to assist Europe in addressing debt crisis.

The world's second-largest economy decreased its US debt securities by $31.9 billion from November, or 2.8%, to $1.11 trillion, according to Treasury Department data released on Wednesday. Its position in longer-term notes and bonds also fell $32.5 billion, or 2.8%, to $1.1 trillion, the least since June 2010. Japan, the second biggest buyer, increased its holding by $3.5 billion to $1.04 trillion.

"We continue to see Chinese Treasury holdings trending lower as they are acting on their desire for diversification and as they may get more involved in the situation in Europe," said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut.

China's policy makers have advocated diversification of the nation's foreign exchange reserves away from U.S. assets. China may support Europe through channels such as the International Monetary Fund, the European Financial Stability Facility and the European Stability Mechanism, said People's Bank of China Governor Zhou Xiaochuan. "China will always adhere to the principle of holding assets of EU sovereign debt," Zhou said in Beijing on Wednesday.