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China’s Treasury Holdings Rose to Record $1.175 Trillion

Chinese President Hu Jintao
Chinese President Hu Jintao told business executives in Washington in January that closer ties between his country and the U.S. were critical amid a tortuous global economic recovery. Photographer: Joshua Roberts/Bloomberg

China, America’s largest creditor, increased its holdings of U.S. debt to a record $1.175 trillion in October, according to revised data issued by the Treasury.

The nation’s investment totaled $1.16 trillion at year-end, the Treasury Department reported yesterday, raising the figure from the previous $891.6 billion. Japan maintained its place as America’s second-largest lender, with $882.3 billion of Treasuries at year-end, compared with $883.6 billion before the revision.

China’s Treasury holdings underscore the government’s confidence in President Barack Obama’s stewardship of the U.S. economy. Overseas investors own about half of the record $8.96 trillion in U.S. publicly traded debt, and Obama needs them to keep buying as he borrows to sustain the expansion.

“They will keep on buying Treasury bonds,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest bank. “The euro was in trouble last year. They need to buy dollar assets.”

The U.K.’s investment was revised down to $272.1 billion from $541.3 billion. It kept its place as America’s third-largest lender.

China buys Treasuries with the dollars it takes in by selling yuan to keep its currency from strengthening, and with the funds it earns from exports.

Chinese President Hu Jintao told business executives in Washington in January that closer ties between his country and the U.S. were critical amid a “tortuous” global economic recovery.

Holdings Jump

The Asian nation’s Treasury holdings climbed amid a bond-market rally. U.S. debt gained from April through September before handing investors a loss in the fourth quarter of last year. The euro tumbled to a four-year low against the dollar in June as governments arranged a bailout fund to rescue the region’s most indebted nations.

Chinese officials had been saying they wanted to seek investments outside the U.S.

The government should consider investing in energy, resources, high technology and agriculture, Jesse Wang, the executive vice president of China Investment Corp., the nation’s $300 billion sovereign wealth fund, said Jan. 15.

China’s yuan rose toward a 17-year high today on speculation policy makers will permit gains to curb inflation.

The currency strengthened for a third day after the Financial News reported Liu Mingkang, chairman of the China Banking Regulatory Commission, as saying the yuan had entered a period of “only appreciation.”

China, the world’s largest exporter, had a trade surplus of $183 billion in 2010.

Treasuries have handed investors a loss of 0.1 percent this year, following a 5.9 percent gain in 2010, based on Bank of America Merrill Lynch data.

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