By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-07-19 15:22

China sold a net US$6.6 billion of US treasury bonds in May this year, according to statistics from the US Treasury Department, Shanghai Securities News reported today.

This is the second drop in China's holdings of US T-bonds; the first drop occurred in April this year, when China sold a net US$5.8 billion of T-bonds.

China remained the second-largest holder of US T-bonds, as its stake fell to US$407.4 billion in May from US$414.0 billion in April this year.

The move signals China's efforts to diversify its forex investment channels for higher returns.

In addition to China, other Asian economies such as South Korea and India also recorded successive drops in their holdings of US T-bonds.

Statistics show that South Korea and India also sold a net US$2 billion and US$4.7 billion of US T-bonds in May respectively.

In May, overseas governmental institutions including central banks sold a net US$2.8 billion worth of US dollar assets, but bought a total of US$14.2 billion in April.

Some insiders said that China is unlikely to sell US T-bonds on a large scale, and the Chinese government also ruled out the possibilities of a massive sell-off.

To pursue higher returns, some economies in Asia such as Singapore, South Korea, and Malaysia have established specialized forex reserve investment companies to diversify investment channels.

China's State-owned forex investment company is expected to launch this year.

It is reported that Japan and China's Hong Kong Special Administrative Region are preparing such investment institutions.

Compared with central banks, personal investors purchased more stocks and corporate bonds in the US.

Statistics from treasury department show that overseas investors bought a net US$126.1 billion of long-term US dollar assets including securities and corporate bonds, up from US$80.3 billion in April.