China's foreign reserves dilemma

US debt deal eases concerns but dollar predicted to weaken

BEIJING / WASHINGTON - The agreement reached by US lawmakers to raise the debt ceiling may have eased investor concern, but China, the largest foreign holder of US debt, is still faced with the challenge of diversifying a massive foreign exchange portfolio endangered by a weakening dollar, economists said on Monday.

US President Barack Obama announced on Sunday that Democrat and Republican leaders agreed on a plan to raise the $14.3 trillion borrowing limit and to cut an initial $1 trillion from federal government deficit spending over the next 10 years.