Information released by the US Department of Treasury's official website on Thursday showed that by the end of May, China's holdings of US Treasury bonds hit US$801.5 billion. After slightly reducing US debt in April, China added US$38 billion to its holdings of the Treasuries, reaching a historically new high.

The increase in May is the largest monthly increase since last October. China's holdings of US debt increased approximately US$300 billion in the past twelve months.

The increase is largely related to the hike of its foreign exchange reserves, according to Shanghai Securities News.

According to the latest statistics released by the central bank on Wednesday, China's foreign exchange reserves topped US$2.13 trillion by the end of June, up 17.84 percent year-on-year.

In the second quarter of this year, China's foreign exchange reserve holdings increased by US$177.90 billion, about 23 times the increase in the first quarter, which indicated that China's foreign exchange reserves were back to a rapid growth after a short slump.

Hot debate has been sparked on whether China should increase its holdings of US debt as China's foreign exchange reserves grew.

Zhou Xiaochuan, governor of the country's central bank, told reporters on the sideline of the annual meeting of the Bank for International Settlements in June that China would maintain the stability and consistency of its foreign exchange reserves policies, emphasizing liquidity, safety and returns. China would not abruptly change its current policies on foreign exchange reserves, he said.

In addition, Japan, the second largest holder of US debt, reduced its holdings of the Treasuries by US$8.7 billion in May following April's cut.

(China Daily July 18, 2009)