New figures show that China's holdings of US government bonds tumbled in December, allowing Japan to take over as the top holder of US government debt.
China's bond holdings dropped substantially to $755.4 billion from $789.6 billion in November, said the Treasury's international capital data report. Japan's holdings increased to $768.8 billion in December from $757.3 billion in November.
China had grabbed the top position from Japan in September 2008 and gradually increased its US bond holdings in relation to Tokyo until December last year, Treasury figures showed.
China had expressed fears late last year about the safety of its dollar-linked assets due to the US's burgeoning budget deficit and the declining dollar at that time as the American economy struggled to emerge from a brutal recession.
US Treasury Secretary Timothy Geithner travelled to Beijing in June to reassure Chinese leaders, saying their money is 'very safe' despite the US budget deficit, which he pledged to cut.
But Chinese state media expressed opposition to Beijing's policy of buying massive amounts of US debt, saying the value of China's assets could be battered as a result of the global financial crisis.
Britain was the third biggest holder of US Treasury bonds, with $302.5 billion in December.
