China drastically slashed its holdings of United States government debt last December, allowing Japan to retake its place as the largest foreign holder of US Treasury bonds.
This is a big shift for China, which has been the biggest lender to the US government since September 2008. The China-US Strategic and Economic Dialogue in Washington last year was relatively smooth. China demanded Washington to take precautions to stabilize their currency and to manage their finances, due to the fact that the US deficit could get worse.
Some analysts feel concerned about China selling US bonds; because it means China finds US debt unappealing. In contrast, some analysts think it is just a short-term statistic data, which is not important.
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