China's holdings of US Treasury Bonds (T-Bonds) increased despite the drop in its foreign exchange reserves during the first two months of this year.

According to Shanghai Securities News, China's holdings of US Treasury Bonds (T-Bond) increased despite the drop in its foreign exchange reserves during the first two months of this year. The official website of the US Treasury Department released the latest statistics on April 15, showing that China's holdings of US treasury bonds hit US$744.2 billion by the end of February, about 4.6 billion more than it was a month ago.

According to the website, China's holdings of US T-Bonds have constantly increased since February 2008, with a growth of US$267.3 billion over the last year.

In contrast, China's foreign exchange reserves increased by only US$7.7 billion in the first quarter of this year, about US$146.2 billion less than the growth during the same period last year. As for monthly statistics, China's foreign exchange reserves dropped by about US$32.5 billion in January, compared with that at the end of December. In February, the decline reduced to US$1.39 billion.

Based on the drop in China's foreign exchange reserves and the increase in its holdings of US T-Bonds, some analysts have come to the conclusion that US T-Bonds are sill one of best foreign exchange reserves investments.

Hu Xiaolian, administrator of the State Administration of Foreign Exchange (SAFE), said recently that China would not adjust its foreign exchange reserves policies because of the short-term fluctuations in the forex market. She said that China would constantly buy US T-Bonds considering the lower overall credit risk.

Statistics show that in addition to China, various countries and regions also increased their holdings of US T-Bonds in February. By the end of February, Japan remained the second largest creditor of the US government, with 661.9 billion in its treasury holdings.

(China.org.cn April 18, 2009)