China reduces holdings in US debt
BBC NEWS | Business | China reduces holdings in US debt
BBC NEWS | Business | China reduces holdings in US debt
China wants to establish a new global currency regime
China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.
China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg.
Japan and the UK - second and third largest holders of US debt - increased their holdings over the same period.
China's holding of US debt is about 7% higher than at the turn of the year.
Inflation fear
In recent months the US government's budget deficit has widened thanks in part to the Obama administration's costly stimulus plan.
Our correspondent in Shanghai says that China is worried about this, and fears the stimulus efforts will fuel inflation in the US, reducing the value of the dollar.
This would then erode the value of the debt China holds in the US currency.
In June, China cut its holdings of US securities by about $25bn, a fall of 3.1%.
'Dollar alternative'
The sales were made as the US treasury secretary was visiting Beijing to try to reassure the Chinese that their investment in his country's government debt is safe.
In 2008, the Chinese increased their holdings in US debt by 52% over 12 months.
"China has said it would like to establish an alternative to the US dollar as the world's favoured currency for foreign exchange reserves," said our correspondent.
"So far there is no evidence that there is a suitable alternative. But these figures suggest they are exploring ways to diversify their investments where they can."
