China losing appetite for U.S. debt

Foreign demand for US Treasury securities fell by a record amount in Decemver as China purged some of its holdings of government debt. China sold $34.2bn in US Treasury securities during the month. The US Treasury said on Tuesday, leaving Japan as the biggest holder of US government debt with $768.8bn. China overtook Japan as the largest holder i September 2008.

The shift in demand comes as countries retreat from the "flight to safety" strategy they embarked on upon during the worst of the global economic crisis and could mean the US will have to pay more to service its debt interest.

For China, the shedding of US debt marks a reversal that it signalled last year when it said it would begin to reduce some of its holdings. Any changes in its behavior are politically sensitive because it is the biggest US trade partner and has helped to finance US deficits.