CHINA reduced its holdings of United States Treasury debt in May as total foreign holdings of US government debt posted a slight increase.

China's holdings fell by US$32.5 billion to US$867.7 billion, the Treasury reported yesterday. Total foreign holdings edged up US$5.8 billion to US$3.96 trillion.

The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of US Treasury debt, responding to fears over the European debt crisis.

China is the largest foreign holder of Treasury securities. The 3.6 percent drop in China's holdings in May will likely raise concerns that China could shift money away from Treasury securities. That could raise the cost of financing America's soaring budgetdeficits.

Japan, the world's second-largest holder of Treasury securities, also cut its holdings in May, to US$786.7 billion. That's a drop of 1.1 percent from April.

Closely watched

The UK, the third-largest holder, posted a 9 percent rise. Its Treasury holdings rose to US$350 billion.

The Treasury reported that net purchases of long-term securities, covering US government debt and that of US companies, increased by US$35.4 billion in May. That followed gains of US$81.5 billion in April and US$141.4 billion in March.

Foreign holdings of US debt are closely watched because they can indicate the direction of US interest rates. The financialcrisis pushed US interest rates down significantly after foreign investors rushed to the safety of US government bonds.

That development helped reduce the cost of financing federalbudgetdeficits, which have soared under the impact of the government's efforts to deal with a severe recession.

The federaldeficit hit an all-time high of US$1.4 trillion last year and is forecast by some economists to total US$1.3 trillion this year.

• yesterday [´jestədi] n.&ad.昨天；前不久 (初中英语单词)
• european [juərə´pi:ən] a.欧洲的 n.欧洲人 (初中英语单词)
• financial [fi´nænʃəl] a.金融的，财政的 (初中英语单词)
• federal [´fedərəl] a.联邦的，联邦制的 (初中英语单词)
• severe [si´viə] a.严厉的；苛刻的 (初中英语单词)
• billion [´biljən] num.万亿 (高中英语单词)
• crisis [´kraisis] n.转折点；危机 (高中英语单词)
• holder [´həuldə] n.所有物；土地；股份 (高中英语单词)
• budget [´bʌdʒit] n.&vi.(做)预算；安排 (高中英语单词)
• impact [´impækt] n.影响，作用；冲击 (英语六级单词)
• deficit [´defisit] n.缺乏，赤字，亏空 (英语六级单词)
• forecast [´fɔ:kɑ:st] vt.&n.预测；预报 (英语六级单词)