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Mainland's US debt holdings drop

The Chinese mainland's holdings of United States Treasury securities posted their first fall in 11 months but sharp fluctuations are unlikely in the short term, economists said yesterday.

The mainland held US$763.5 billion of US Treasury securities in April, down from US$767.9 billion in March, according to the monthly Treasury International Capital, or TIC, report. Hong Kong's holdings rose to US$80.9 billion in April from US$78.9 billion a month earlier.

"The Chinese mainland's drop in Treasury securities holdings doesn't come as a surprise," said Jinny Yan, a Standard Chartered Bank economist in Shanghai, yesterday. "It's unlikely for China to maintain its rising pace in its buying of Treasury securities since 2006."

The US remains the world's largest economy and China is also the biggest creditor of the US government.

The Federal Reserve's policy to buy more Treasury bonds has fuelled expectations that the US will pump more money to finance the purchase and lead to the depreciation of the US dollar which will erode the value of China's US assets.

Economists said while China may keep its US assets, it is also telling the world it is seeking alternatives. But "in the short term, there are limited alternatives," said Yan.

China plans to buy US$50 billion in International Monetary Fund bonds which will be offered in the IMF's special drawing rights.


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